German economic growth expected to have been flat in last 3 months of 2019
Today, German authorities will release a preliminary estimate of German economic growth for the fourth quarter of 2019.
At the beginning of last year, analysts had predicted that 2019 might revive Germany’s economic fortunes. Instead, the year brought tepid growth in the first and third quarters, and contraction in the second.
The causes of this lethargy are manifold. Brexit uncertainty and US President Donald Trump’s tariff battles with China and Europe compounded with new emission rules for automakers will reduce growth for the time being. In the long term, Germany faces a productivity crisis due to its ageing population and lacklustre investment in new technologies.
Expect the fourth quarter figures to show limited growth or even a slight contraction. Considering that the Eurozone’s growth dropped from 1.4% to 1.1% over the same period, it is unlikely that Germany performed much better. Furthermore, industrial output plummeted by 3.5% in December, making 2019 the worst year of the decade for German manufacturing. It is unlikely that the government, with its strict commitment to budget surpluses, will respond with fiscal stimulus to merely sluggish or stagnant growth. Only entering into a recession would compel Berlin to attempt a course correction.
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