Germany's Economy Stagnated in 4Q as Consumption Lost Steam -- Update

Date : 14/02/2020 @ 20:11
Source : Dow Jones News

Germany's Economy Stagnated in 4Q as Consumption Lost Steam -- Update

By Maria Martinez

 

Germany's economy stalled in the fourth quarter as government and household consumption slowed, the federal statistics agency Destatis said Friday.

Gross domestic product remained flat at 0.0% compared with the previous quarter, according to Destatis. This is below economists' expectations of a 0.1% expansion according to a survey by The Wall Street Journal.

The statistics agency also revised data for the third quarter of 2019, saying that Germany's GDP increased 0.2% in the period, compared with a first estimate of a 0.1% rise.

While the economy got a boost from consumption in the third quarter, both government and household consumption slowed markedly in the fourth quarter, Destatis said.

"With German gross domestic product stalling in the last quarter of 2019, the economy began this year with even less momentum than most had expected," said Andrew Kenningham, chief Europe economist for Capital Economics.

Ahead of the release, weak data for manufacturing orders and industrial production in December had raised fears that the economy had stagnated or even contracted in the fourth quarter.

Gross fixed capital formation in machinery and equipment was down considerably compared to the third quarter, while fixed capital formation in construction and other fixed assets continued to increase.

"The development of foreign trade slowed down the economic activity in the fourth quarter," Destatis said.

According to provisional calculations, adjusted exports were slightly down on the third quarter, while imports of goods and services increased.

GDP grew 0.4% on year in the fourth quarter on a calendar and price-adjusted basis, Destatis said, in line with a Wall Street Journal poll of economists.

In the fourth quarter, Germany employed 45.5 million people, an increase of 0.7% compared with the same period in 2018.

Forward-looking surveys give mixed signals about the German economy. While some business surveys rose slightly in January, others such as the Ifo business climate index declined, Mr. Kenningham said.

These surveys were collected before the coronavirus outbreak, which could cut a little from GDP in the first quarter given Germany's exposure to global supply chains and demand from China, Mr. Kenningham said.

The latest soft indicators and industrial data for December do not bode well for the short-term outlook, said Carsten Brzeski, chief economist for ING Germany.

"Stagnation, with a risk of a technical recession, is currently the only option for the German economy," Mr. Brzeski said.

 

Write to Maria Martinez at maria.martinez@wsj.com

 

(END) Dow Jones Newswires

February 14, 2020 03:56 ET (08:56 GMT)

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