German Economy Shrinks in the Third Quarter

German Economy Shrinks in the Third Quarter


German economy, the largest in Europe, shrank in the third quarter by 0.2 percent, said Destatis, the country’s Federal Statistics Office.  This is against the Reuters forecast of 0.1 percent for the quarter. The fall happens after a growth rate of 0.5 percent in the second quarter. The 0.2 percent fall in GDP is the first contraction the economy experiences since 2015, and the weakest one, after the first quarter of 2013. The major factors behind the fall include the weaker trade position and lower consumer spending. In the background, Eurozone economy recorded its slowest growth rate in the last quarter, as per information from the European statistics agency.

Though Germany is a major exporting nation, the quarter saw exports falling and imports rising, thus causing a weakening of the country’s foreign trade position. Domestic demand presents a mixed picture, with households spending less, and industries investing more said Destatis. Government spending too had been slightly higher in the quarter. One major cause for the weakness in trade was a temporary one, as the automobile industry had to bring down production to comply with the new emission standards. The ING economist in Germany, Carsten Brzeski observed that poor performance is a wake-up call for the country. He added that the tensions and weaknesses in the new markets will have a prolonged impact on Germany’s economic growth.

Germany’s Economy Minister Peter Altmaier said that a 0.2 percent contraction is not a catastrophe. He added that the upswing will resume in the fourth quarter, as the contraction is a temporary phenomenon. What happened was merely a disruption in the upturn, and the upturn will continue when the temporary factors which caused the slowdown to cease to exist, said a report from the ministry. However, there is some anxiety among analysts about the impact on Germany of global trade disputes and Donald Trump’s trade policies. Also, the political instability in the country caused by the fissures in Angela Merkel’s coalition adds to make the picture a little bleak.

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