German economic growth slowed to its weakest pace in a year last quarter, a reminder of the fragility of the eurozone’s recovery in a time of rising uncertainty.
GDP rose a seasonally adjusted 0.2 percent in the three months through September, the German Federal Statistics Office said yesterday.
That is below the 0.3 percent forecast in a Bloomberg survey of economists and follows an expansion of 0.4 percent in the second quarter. Growth was 1.7 percent in the same period last year.
As Europe’s biggest economy, Germany’s fortunes are key to the recovery of the 19-nation eurozone, where GDP figures are likely to show growth stuck at mediocre levels.
The European Central Bank (ECB) is to review its stimulus program in less than four weeks, when it will have to factor in a global economic outlook characterized by the rise of populists critical of international trade deals.
“Germany’s numbers probably won’t change much for the overall euro-area figures,” said Ralph Solveen, head of economic research at Commerzbank AG in Frankfurt. “The economy is growing in the euro area, but still not quite helping the ECB meet its price-growth target of 2 percent. It’s probably not enough to satisfy them and we think they will have to extend stimulus in December.”
Domestic demand drove the German expansion last quarter as both government and private consumption rose, the statistics office said.
The global economy dragged on growth, with exports contracting slightly. Investment in equipment also slipped, while construction climbed.
The Bundesbank has already noted that the economy cooled in the summer months — a phase it said was probably temporary — and recent data has showed a pickup in momentum.
Business confidence rose to its highest level in more than two years and unemployment dropped to a record low.
Even so, risks might be mounting. US president-elect Donald Trump won the election on a platform that included a pledge to renegotiate or cancel trade deals, and the UK looks on track for a hard exit from the EU and its single market.
Bundesbank President Jens Weidmann said in a speech after Trump’s election that “pronounced political uncertainty” was weighing on growth prospects, raising the “question of how much protectionism and isolationism will determine the future political agenda.”
The world economy “faces once again an abnormal degree of uncertainty,” ECB Vice President Vitor Constancio said in Frankfurt on Monday.
He also warned against drawing “hasty, positive conclusions” from the response of financial markets to the US election.
The US dollar climbed and bonds slumped as investors bet that Trump would follow through on a pledge to unleash a wave of fiscal stimulus.
The Netherlands was to publish its third-quarter GDP estimate at 9:30am local time yesterday, followed half an hour later by Italy, the currency bloc’s third-largest economy.
Data for Portugal and Cyprus were also set to be released, before figures were due to be published for the eurozone.
The economic expansion in the single currency area probably held at 0.3 percent, in line with a flash estimate and unchanged from the second quarter, according to a Bloomberg survey of economists.
The ECB’s Governing Council is to meet on Dec. 8 to decide whether to extend its program to buy 80 billion euros (US$86.37 billion) a month of debt through March. The Frankfurt-based central bank is also to publish fresh economic forecasts that extend to 2019.
The European Commission slashed its next-year economic growth forecasts for the eurozone last week, to 1.5 percent from May’s 1.8 percent.
The Brussels-based executive warned of instability caused by the UK’s decision to leave the EU, and the surge of anti-globalization and populism around the world.
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