German economy slumps in third quarter, hopes for rebound

Business Wednesday 14/November/2018 13:52 PM
By: Times News Service
German economy slumps in third quarter, hopes for rebound

Frankfurt am Main: Germany, Europe's largest economy and top exporter, went into reverse in the third quarter, shrinking 0.2 per cent after a gain of 0.5 per cent in the previous three months, official data showed on Wednesday.
It was the first quarter-on-quarter fall in gross domestic product (GDP) since early 2015, federal statistics authority Destatis said, and worse than the 0.1-per cent slip forecast by analysts.
"The slight fall in GDP was above all down to external trade developments," Destatis said in a statement, pointing to lower exports and higher imports than in the second quarter.
Meanwhile at home there was higher government spending and private-sector investment, but consumer spending fell.
Earlier indicators had hinted at a slowdown for Germany, with economists highlighting in particular new European emissions tests weighing on the vital car industry.
New car registrations plunged more than 30 per cent year-on-year in September as the so-called WLTP cycle was introduced.
The auto industry, Germany's largest, employs around 800,000 people in firms ranging from giants like Volkswagen, BMW or Mercedes-Benz maker Daimler to tiny components suppliers.
"The decline in exports in Q3 looks to be in large parts due to the car industry, just like the decline in the wider economy," tweeted Oxford Economics analyst Oliver Rakau.
"The real question is the size and speed of the bounce-back over the coming quarters."
ING Diba bank economist Carsten Brzeski pointed to "several one-off factors, but also some more worrying structural developments" behind the slump.
Trade tensions with the US under President Donald Trump and weakness in emerging markets have weighed on export powerhouse Germany.
"Don't underestimate the negative confidence effect from the World Cup," when Germany dropped out in the group stage, he added.
But "low interest rates, a weak euro and some fiscal stimulus... are strong arguments in favour of a growth rebound in the coming quarters," Brzeski said.