Business

Germany Avoiding Recession

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Germany has narrowly avoided a technical recession after the latest figures showed the country’s economy grew by 0.1% in the third quarter.

Figures from the German statistics office Destasis showed positive growth in gross domestic product from July to September compared to the previous quarter. The growth allowed Europe’s largest economy to narrowly sidestep a recession.

The German Economy Minister Peter Altmaier said that while the numbers show the country avoided a technical recession in the third quarter, economic development in the region is still fragile.

Germany’s GDP (gross domestic product) rate exceeded the -0.1% contraction expected by analysts. On an annual basis, the economy grew by 0.5% from July to September, the Federal Statistics Office reported. Second-quarter growth was revised down from -0.1% to -0.2% and two consecutive periods of negative growth would have constituted an official recession.

This is welcome news for Europe’s economy, as it battles a global slowdown, Brexit uncertainty, and the spillover effects of the US-China trade war.

The value of total German exports – including services – is about 47% of the country’s whole economy, its gross domestic product or GDP.

There is a lot of imported content in those exports. So an alternative way of looking at it is the value-added in Germany of the goods it sells abroad. That is about a third of GDP.

While a recession may have been avoided, for now, room for improvement remains. On Thursday, German Economy Minister Peter Altmaier told journalists, “We do not have a technical recession, but the growth numbers are still too weak.”

 

The manufacturing focus that made the country rich has proven an Achilles heel over the past 18 months. Brexit and the US-China trade war have disrupted manufacturing supply chains and hurt investor confidence. The automobile branch, a pillar of the German economy, is struggling under sinking demand as it tries to pull off the expensive transition away from diesel engines.

But other economic indicators paint a more complex picture. Destasis reports that consumer spending was largely to thank for third-quarter economic growth. Germany’s statistics office reported that export figures for September were better than expected. In recent months, many in Germany have stressed that it is a mistake to only consider total economic growth when evaluating the health of an economy.

Last week the German government’s independent panel of economic advisers reported that their analysis found no signs of a “broad, deep recession”. The government has largely resisted calls to use its significant budget surplus on stimulating the economy.

 

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