German Economy Stalls As Estimated In Q4

The German economy stagnated in the fourth quarter, in line with the initial estimate, as the positive contribution to growth from investment was nullified by foreign trade, detailed data from Destatis revealed on Tuesday.

Gross domestic product remained flat sequentially after expanding 0.2 percent in the previous quarter. The statistical office confirmed the flash estimate released on February 14.

Consequently, price-adjusted GDP grew 0.6 percent in 2019.

On a non-adjusted basis, GDP rose 0.3 percent year-on-year after a 1.1 percent expansion in the third quarter.

On a working-day basis, the economy grew 0.4 percent year-on-year following a 0.6 percent increase in the previous quarter. The annual rates also matched the preliminary estimate.

There were mixed signals regarding domestic demand at the end of the year. Household consumption remained unchanged and general government expenditure rose only 0.3 percent from the previous quarter.

While gross fixed capital formation in construction climbed 0.6 percent largely due to the mild weather, capital formation in machinery and equipment decreased notably by 2.0 percent. At the same time, capital formation in other fixed assets was up 1.1 percent.

Further, foreign trade slowed down the economic activity. Exports were down 0.2 percent, while imports rose 1.3 percent.

Changes in inventories contributed 0.6 percentage points to the growth in the fourth quarter.

Looking ahead, Carsten Brzeski, an ING economist, said recent tentative signs of a bottoming out in the manufacturing sector have been overshadowed by the possible adverse economic impact from the coronavirus, be it directly through weaker demand from Asia, or indirectly through supply chain disruptions.

In the absence of either a significant pick-up in global trade or additional fiscal stimulus, it is hard to see the German economy leaving the slow lane any time soon, the economist added.

Another data from Destatis showed that general government budgets achieved a surplus in 2019 for the eighth time in a row.

General government budget surplus was EUR 49.8 billion, which was less than the record surplus in 2018 when general government had achieved a surplus of EUR 62.4 billion. As a percentage of the gross domestic product, this was equivalent to 1.4 percent.

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