Germany narrowly misses recession but Europe’s economic woes endure

Data of German economic growth for the three months to December will be released today. While calculations suggest the economy grew by 0.1%, the figures are expected to confirm that the world’s fourth largest economy grew at 1.5% in 2018-its slowest rate in five years.

Germany experienced economic contraction in the third quarter of 2018 amid global economic headwinds, persistent trade tensions with the US and the risk of a no-deal Brexit—an ongoing concern. These factors also saw the economic ministry revise down its 2019 growth forecast from 1.8% to 1%, although authorities remain confident of an upward trend in 2019 since the economy is operating at full employment.

Today’s figures will show that Germany narrowly avoided a recession—defined as two consecutive quarters of negative growth. While this may appear to be good news, the economic slowdown has lasted longer than anticipated and Germany seems to be struggling to recover.

This is indicative of Europe’s overall exposure to the global economic slowdown. Indeed, Eurozone GDP growth is at a four-year low of 1.7%. With mounting threats of a US-China trade war and a no-deal Brexit, do not expect the slowdown to abate anytime soon.

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