July 30, 2019

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German economy narrowly avoids recession

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Confusion over new emission requirements has hit the nation’s automotive business

Germany’s economy nearly prevented falling into recession in the course of the ultimate three months of final yr.

Europe’s largest economy registered zero development in the course of the fourth quarter of 2018, the nation’s Federal Statistics Office mentioned.

That means it prevented two consecutive quarters of contraction, which is the same old definition of a recession.

A weak commerce efficiency dragged on the economy, and shopper spending remained subdued.

The zero development recorded within the October-to-December interval adopted a 0.2% contraction within the earlier quarter.

Reasons for slower development final yr embody a slowdown within the international economy and a weaker automotive sector, with German customers much less keen to purchase new vehicles amid confusion over new emission requirements.

In addition, low water ranges, notably within the Rhine, affected development by holding again motion of some items.

‘Worrying’ outlook

Jack Allen, senior Europe economist at Capital Economics, instructed the BBC: “If you take a look at Germany throughout 2018 we have seen a reasonably broad-based slowdown in development. We’ve seen family consumption sluggish, we have seen enterprise funding sluggish and we have seen export development sluggish.

He added: “What’s notably worrying is that the early indicators for 2019 recommend {that a} robust rebound is unlikely.”

US tariffs on EU automotive exports, which US President Donald Trump has threatened, may have a serious impression on Germany, Mr Allen mentioned, however even when these are prevented the slowdown within the international economy means Germany remains to be solely anticipated to develop by about 1% this yr, in contrast with about 1.5% in 2018.

However, Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, mentioned he was “optimistic” that the primary quarter of this yr can be higher.

“The January [economic] surveys have been poor… however web exports will not be in free fall without end, and customers’ spending additionally ought to select up.”

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