German economy expected to accelerate in first quarter despite headwinds
Officials in Germany will announce the first estimate of economic growth for the first three months of 2019 today. Economists polled expect the economy to have accelerated by 0.4%—a marked improvement on the past six months.
Europe’s largest economy faltered in late 2018. Third quarter data revealed an economic contraction of 0.2%, while flat growth of 0% was recorded in the final three months of the year.
German government forecasts released last month halved growth rates from 1% to just 0.5% in 2019, the second lowest level in the EU.
Despite relatively strong domestic demand and high employment, Germany’s export-oriented economy has been hit by jitters caused by the US-China trade war. Trade between Germany and these two economic giants amounts to almost $150 billion or more than 15% of all German trade. Uncertainty around Brexit and pressure on Germany’s auto industry by changes to emissions standards are also causing concern for businesses.
Many analysts believe that increasing government spending could help soften the impact of external headwinds. However, Berlin has a long record of fiscal conservatism and has run a current account surplus for almost every budget since 2000, making a government splurge unlikely. Once the envy of Europe, Germany’s economy now looks sickly.
Wake up smarter with an assessment of the stories that will make headlines in the next 24 hours. Download The Daily Brief.
