German economic growth cools in 2018 to lowest rate in five years
Last Modified: 04:22 AM, Tue Jan 15, 2019

Claire Jones

FT.com. 15 January 2019
Europe’s powerhouse may avoid technical recession in second half of year, economists say

Germany’s economic growth slowed substantially in 2018, but the eurozone’s economic powerhouse appeared to have avoided a technical recession in the fourth quarter as strong domestic demand countered weaker export sales.

The German economy grew by 1.5 per cent in 2018, the weakest rate since 2013, the Federal Statistics Office said on Tuesday. That follows growth of 2.2 per cent in 2017 and brings the pace of the country’s economic expansion closer in line with the long-term average of around 1.2 per cent.

The 1.5 per cent figure suggests growth was positive in the fourth quarter after the economy contracted in the third quarter. “If there are no revisions to past data, then the 1.5 per cent suggests at least 0.3 per cent quarter on quarter,” said Jörg Krämer, chief economist at Commerzbank.

Fears of a technical recession, or two-straight quarters of economic contraction, had emerged last week after industrial production plunged between October and November, highlighting the problems facing the country’s manufacturers.

Gross domestic product had fallen 0.2 per cent in the third quarter from the second, according to official data. Fourth quarter figures are due next month.

Makers have been hit by poorer sales following signs of a world economic slowdown and political uncertainty surrounding Brexit and the trade war between the US and China. The UK, US and China are all among German makers’ biggest markets.

Export sales sank in the second half of the year on the back of weak external demand — leaving import growth outpacing them and placing the trade balance into negative territory for the year. Germany is the most reliant of all of the major global economies on trade and signs that the world economic cycle is past its peak has led to an outbreak of pessimism among the country’s manufacturers.

However, a strong labour market has helped boost domestic demand. Unemployment is now at its lowest level since the re-unification of East and West Germany.

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Publication: FT.com
Organization: Commerzbank AG
Location: Germany, Europe
People: Jörg Krämer, Claire Jones
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