Thursday 14 November 2019 8:33 am

Germany beats recession fears in third quarter - but only just

Germany narrowly avoided falling into recession in the third quarter thanks to unexpectedly strong consumer spending, data showed today.

Europe’s largest economy thwarted expectations of a contraction as it eked out a 0.1 per cent quarter-on-quarter growth rate.

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The country’s GDP posted a 0.5 per cent year-on-year growth rate from July to September, beating April to June’s 0.3 per cent expansion, Federal Statistics Office data showed.

However, economy minister Peter Altmaier warned: “We do not have a technical recession, but the growth numbers are still too weak.”

Meanwhile Carsten Brzeski, European economist at ING, warned that Germany has entered a period of “de factor stagnation”.

“The German economy can still be divided into two worlds,” he added. “The depressive world and the happy-go-lucky one. In the depressive world, there are very few signs of an imminent bottoming or recovery of the manufacturing sector since the summer of 2018.

“The sector is facing and will continue to face cyclical challenges, as ongoing trade conflicts, Brexit uncertainty and slower Chinese growth, along with structural challenges, disrupt the automotive industry.”

However, German GDP only rose by 0.08 per cent in the third quarter, after a decline of 0.24 per cent in the second quarter.

Household spending rose along with exports to beat economists’ dour expectations of a technical recession, where an economy posts two consecutive quarters of declines.

While Brzeski said low inflation and interest rates have buoyed spending and the construction sector “keeps on booming”, he added that Germany faces an uncertain 2020.

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“It looks as if either the cyclical factors weighing on German industry will dissipate somewhat, with the entire economy rebounding, or the domestic part of the economy will also slow down,” he said.

A Reuters poll of analysts found they expected Germany’s economy to contract 0.1 per cent on a quarterly basis, and to expand 0.5 per cent year on year.

Main image credit: Getty Images