Wednesday , September 30 2020

Germany reports its slowest economic growth in six years


Germany’s economy made a slight recovery in the fourth quarter, ending a year in which manufacturing took a battering and the country was dragged to the brink of a recession.
The statistics office estimates that output registered a small increase in the final three months of 2019, a year that saw growth of just 0.6%. That’s the slowest in six years, amid trade tensions and a broader slowdown in demand that added to fundamental structural challenges the country is battling.
The small increase in GDP at the tail end of 2019 may reinforce hopes that the economy is through the worst of the slump. It also means less chance the government will cave to calls that it provide more fiscal support for the economy.
But the economy, and particularly its industrial heart, are far from out of trouble. Carmakers including Volkswagen AG are facing a critical period as they push sales of electric vehicles, while manufacturers such as Siemens AG are under pressure to adapt to climate change. Geopolitical uncertainty in the Middle East and continued risk of a disruptive Brexit will also weigh on sentiment and momentum.
The figures for 2019 showed investment and exports posted only modest gains. At the same time, private and government consumption as well as construction accelerated. The government recorded a budget surplus of 1.5% of GDP.
“After a dynamic start to the year, and a decline in the second quarter, there were signs of a slight recovery in the second half,” said Albert Braakmann, head of the statistics office’s department that compiles GDP.
The euro was little changed against the dollar following the remarks. German 10-year bonds slipped for a second day, declining three basis points to -0.20%. They’ve been slowly edging back up toward positive territory recently on hopes that the economy is through the worst of the slump.
Business expectations improved at the end of last year and the Economy Ministry has pointed to a slightly better outlook for industrial activity, yet actual data are still largely disappointing. Manufacturing orders continued to decline late last year, and exports dropped.
In the 19-nation euro area, industrial production rose 0.2% in November, less than economists predicted, as output of intermediate and consumer goods declined.
Germany’s outlook for 2020 is barely better than its performance last year. Economists see growth accelerating to only 0.7% this year. The US, by comparison, is forecast to expand more than twice that pace.
“Germany’s economy saw a slight recovery in growth in 4Q, according to the statistics office — that’s consistent with our slightly above-consensus expectation for an expansion of 0.2% to be recorded. Leading indicators have turned up into 2020 and we see the worst as being over for for the German economy. Renewed trade tensions are the biggest risk to that view, Jamie Rush of Bloomberg Economics said.
Persistent weakness has fed calls for the government to ramp up fiscal stimulus. It’s already pledged to step up investment in infrastructure and education, and committed to spend 54 billion euros ($60 billion) fighting climate change — more than Germany’s stimulus plan following the financial crisis. It’s said more support will be available if the economy
Two weeks into the new year, Germany is among the first of the world’s advanced economies to publish 2019 GDP figures. As the world’s third-largest exporter, it acts as a bellwether for the global economy, which is widely estimated to have had its worst year since the Great Recession a decade ago.

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