Germany on the edge of recession following weak trade performance

Friday, February 15th 2019 - 08:55 UTC

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Germany's economy just about avoided falling into recession during the final three months of last year. Europe's largest economy registered zero growth during the fourth quarter of 2018, the country's Federal Statistics Office said. That means it avoided two consecutive quarters of contraction, which is the usual definition of a recession.

A weak trade performance dragged on the economy, and consumer spending remained subdued. The zero growth recorded in the October-to-December period followed a 0.2% contraction in the previous quarter.

Reasons for slower growth last year include a slowdown in the global economy and a weaker car sector, with German consumers less willing to buy new cars amid confusion over new emission standards.

In addition, low water levels, particularly in the Rhine, affected growth by holding back movement of some goods.

Jack Allen, senior Europe economist at Capital Economics, told the BBC: “If you look at Germany across 2018 we've seen a pretty broad-based slowdown in growth. We've seen household consumption slow, we've seen business investment slow and we've seen export growth slow.

He added: ”What's particularly worrying is that the early signs for 2019 suggest that a strong rebound is unlikely.“

US tariffs on EU car exports, which US President Donald Trump has threatened, could have a major impact on Germany, Mr. Allen said, but even if these are avoided the slowdown in the global economy means Germany is still only expected to grow by about 1% this year, compared with about 1.5% in 2018.

However, Claus Vistesen, chief Euro-zone economist at Pantheon Macroeconomics, said he was ”optimistic“ that the first quarter of this year would be better.

”The January [economic] surveys were poor... but net exports won't be in free fall forever, and consumers' spending also ought to pick up.”