Germany Just Logged The Worst Annual Growth In 6 Years (While Posting An Eighth Straight Budget Surplus)

Lest anyone should forget just how damaging the trade war has been for the global economy on a day when the Trump administration took an ostensibly important step towards deescalating hostilities with China, note that Germany just capped off its worst year in six.

The world’s fourth-largest economy is, at least according to the latest available data, still mired in the deepest manufacturing slump in recent memory. On Wednesday, the statistics office said that according to preliminary calculations, GDP grew just 0.6% in 2019.

That caps a decade of growth in uninspiring fashion. The annual average from 2008 to 2018 was 1.3%. “Growth lost momentum in 2019”, Berlin lamented Wednesday. “In the previous two years, price-adjusted GDP grew much more strongly”.

Although consumption and government expenditures posted gains, fixed capital formation in machinery and equipment was lackluster, growing just 0.4%.

Exports, meanwhile, contributed very little, a sign of weak external demand amid China’s deceleration and Brexit uncertainty, which weighed heavily on the euro-area.

The statistics office underscored the extreme divergence of fortunes for the resilient services sector and German industry, which has been one of the biggest casualties of the trade war.

“On the production side of GDP, there were two different economic trends in 2019”, the report reads. “On the one hand, the service sector and the construction industry recorded high growth rates. On the other hand, industry (not including construction) saw an economic slump”.

Industrial output ex-construction (which accounts for more than 25% of the economy), was down 3.6% in 2019, as the slump in the country’s storied auto sector weighed.

Volkswagen, BMW, Daimler and others produced just 4.66 million vehicles in German factories last year, the least since 1996.

Factory orders have contracted for a truly unfortunate 18 consecutive months.

Germany also said Wednesday that going forward, the initial read on GDP will be available 30 days after the end of the quarter, as opposed to the 45-day lag the market is accustomed to.

The preliminary read on Q4 output, though, will still be released on the old schedule and is thus expected on February 14.

Germany is expected to eke out growth in Q4. A recession was narrowly averted in the third quarter.

The statistics office unironically notes that the general government “achieved a marked surplus again”. It was the eighth in a row.


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