Germany ‘gets away with a black eye’ as it dodges recession | Business News


The German economy has narrowly missed tumbling into recession but recorded output growth of just 0.02% in the final quarter of 2018.

In preliminary figures, which could yet be revised, the country’s statistics agency said construction and business spending helped Europe’s largest economy avoid two consecutive quarters of negative GDP (gross domestic product) growth – a technical recession.

Output in the previous three months, July to September, had been measured at -0.2% as demand in Germany’s export-led economy tumbled amid the world economic slowdown, mostly linked to China’s trade war with the US.

The updated figures meant Germany’s economy grew at its slowest rate for five years in 2018 as a whole.

Production in the country’s car industry continued to drag on growth given weaker demand – a factor also blamed for a slowdown in UK economic growth to 0.2% between October and December.

Germany’s automotive sector, which counts BMW, Audi and Mercedes among its brands, has also been hit by delays around new emissions checks.

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Bottlenecks in Germany’s car-making sector have been blamed for the economic contraction

The pressure on Germany’s factories has offset support from a relatively strong domestic economy.

Analysts point to a low unemployment rate of 3.3% and hope that the worst is now behind Germany given renewed hopes of progress in a truce being found to end the trade war.

However, Germany’s export-led model remains particularly exposed in the EU to the continued threat of a hard Brexit, which would see the UK leave the EU, its single market and the customs union

Research last year by the IW Institute in Cologne estimated that 5% of German output was directly or indirectly linked to UK trade.

“Germany got away with a black eye,” DekaBank economist Andreas Scheuerle said of the fourth-quarter numbers.

“But the first quarter is not looking like it is going to be easy, either, as political uncertainties are weighing heavily on corporate confidence.”

European stock markets reacted positively to the numbers with the DAX – hit hard by export weaknesses in the second half of 2018 – rising 0.3% in early deals.

The euro also gained ground against both the dollar and the pound.

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