Germany narrowly dodged its first recession in six years, putting a damper on speculation that the government would add fiscal stimulus any time soon.
The surprise expansion does not change the fact that the country’s economy is going through a torrid period that has turned it from the eurozone’s traditional growth engine into a source of weakness.
A pile up of trade tensions, weaker global demand and turmoil in the automobile sector has led to the worst manufacturing slump in a decade and put question marks over the country’s role as an economic powerhouse.
Photo: AP
The 0.1 percent increase in GDP was led by consumer and government spending. Construction and exports also rose, while investment in machinery and equipment fell.
The contraction in the second quarter — which had sparked months of recession speculation — was revised to 0.2 percent from 0.1 percent.
“I would put ‘mild positive’ as a descriptor on the German GDP report,” Northern Trust Bank chief investment strategist Jim McDonald said. “German is the point of the spear when it comes to manufacturing and especially exposure to China, but consumer spending across all of Europe has been holding up better.”
There have been some signs that the German economy might be through the worst of its downturn.
Business sentiment appears to have stabilized and investor confidence about the outlook is improving, but it is far from an all-clear, with most key indicators still at multi-year lows and the economy expected to post minus-1 percent growth this year and next.
The global economy remains under pressure and the pain has been felt across the German corporate royalty, with firms from Siemens AG to BASF AG repeatedly warning that trade fights are hitting sentiment and investment.
Upheaval in the vehicle industry due to emissions and the switch to electric engines has compounded the slump.
German Minister of Economic Affairs and Energy Peter Altmaier, speaking on ARD television shortly after the data were published, said that characterized growth as “still too weak.”
“That means the upward trend has started, but it’s proceeding very slowly,” he said.
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