Germany avoids recession despite ’18 growth slowdown

16 January, 2019 12:00 AM printer

FRANKFURT AM MAIN: Official data suggested Tuesday that Germany avoided a recession at the end of 2018 but confirmed a sharp slowdown in growth last year as Europe's largest economy cooled off from boom times.

Economic growth sank to 1.5 percent in 2018 from 2.2 percent in the previous two years, federal statistics authority Destatis said, report agencies.

In absolute terms, Germany's 2018 GDP was around 3.4 trillion euros ($3.9 trillion) or 40,900 euros per person, the statisticians found.

While there had been a "dip" in the third quarter, when output shrank by 0.2 percent, "there were signs of a slight rebound at the end of the year," Destatis expert Albert Braakmann told reporters in Berlin.

Dodging two consecutive quarters of shrinkage -- the official definition of a recession -- means "it currently looks as if the German economy could get away with one black eye," ING Diba bank economist Carsten Brzeski commented.

But "what matters most is the fact that the slowdown of the German economy in the summer has been lasting longer than anticipated and seems to be more than only a temporary blip," he added.

Many observers and the German government pointed to one-off factors to explain the 2018 setback.

Carmakers were confronted with a production bottleneck as they scrambled to adapt to new EU emissions tests, which massively slowed sales from September.

Meanwhile a long drought brought low water levels in the Rhine that hampered shipments of chemicals and raw materials.

But Europe's powerhouse also faces longer-term hurdles to growth.

Uncertainty about Brexit threatens trade with one of Germany's biggest partner countries, while US President Donald Trump's trade showdowns with Brussels and Beijing have weighed on Berlin's massive exports.

For now, observers can take comfort from strong domestic fundamentals, notably historic low unemployment making for high consumer spending.