German economy remains stagnant in the fourth quarter of 2019

on Feb 25, 2020
Updated: Mar 11, 2020
  • German economy remains stagnant in the fourth quarter of 2019.
  • Exports dropped by 0.2% in the last quarter of 2019.
  • Gross investment climbed 2.9% in the fourth quarter of 2019.
  • German economic growth prints at 0.6% in 2019.

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The Federal Statistical Office of Germany released the quarterly GDP report on Tuesday. The data suggested German economic activity to have remained weighed in 2019’s fourth quarter ascribed to the decline in exports. The data also hinted at the largest European economy having lost pace even before the outbreak of Coronavirus in China.

According to the experts, German manufacturers that rely heavily on exports were hit in the recent quarter due to a range of macroeconomic events like Brexit, global economic slowdown, and the tariff disputes that fueled uncertainty in the global business outlook.

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Exports Dropped By 0.2% In The Fourth Quarter

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As compared to the third quarter, exports were reported to have seen a 0.2% decline in the fourth quarter. This translated into a 0.6 percentage points increase in net trade from GDP growth. IFO President Clemens Fuest recently commented that trade outlook is likely to keep under pressure in the upcoming months due to the rising cases of Coronavirus outside China. IFO’s February report announced a sharp decline in export expectations with the auto industry recording the weakest reading.

Gross investment that also covers the construction sector saw a 2.9% increase in 2019’s fourth quarter that contributed 0.6 percentage points to German economic growth. Another 0.1 percentage points were contributed by state consumption while private consumption failed to make a contribution, as per Tuesday’s data. Private consumption is traditionally seen as a fundamental component that offers economic support.  

The Statistical Office also highlighted a 0.6% economic growth in Germany in 2019. The growth rate was branded the weakest since 2013 when the eurozone was confronted with a debt crisis. In fiscal 2020, however, the German government is confident that the economic growth will climb to 1.1% supported by additional working days in the leap year.

German Economy Could Take A Bigger Hit If Coronavirus Emergency Persists

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Andrew Kenningham of Capital Economics commented on Tuesday’s data and predicted that the German economy will remain under pressure in 2020’s first quarter as domestic investment and global demand is unlikely to pick up in this period. While the impact of the health emergency in China has so far been minimal on the German economy, Kenningham added, the scenario could change if the virus crisis persists in the upcoming months.

The importance of China as a trading partner for Germany is huge as its auto industry doesn’t only rely on Chinese supply chains but also the massive demand that the world’s second-largest economy creates for it.

The German quarterly GDP report was unable to stir a major movement in the forex market on Tuesday.

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