german flash q2 gdp turns negative
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LARGEST EUROZONE ECONOMY CONTRACTS

- Quarterly Growth Matches -0.1pct Forecast

- Annual Workday-Adjusted Growth Falls To 0.4pct

- Non-adjusted Annual Growth Rate Flat

- Data Come Ahead Of Second Estimates For EZ GDP

 

Frankfurt, 14 August (LS NEWS) – Headline growth in Europe’s largest economy turned negative in the second quarter as developments in international markets dragged on domestic activity, the German federal statistics office said. The 10-year Bund hit a new record low on the news.

 

German GDP contracted at a quarterly rate of 0.1pct, which was in-line with estimates, after growing 0.4pct in the first quarter.

 

The annual workday-adjusted rate beat the consensus expectation of flat growth but fell to 0.4pct from an upwardly revised reading of 0.8pct. The non-adjusted figure dropped to 0.0pct versus the consensus of -0.3pct and an upwardly revised 0.8pct.

“The development of foreign trade slowed down economic growth because exports recorded a stronger quarter-on-quarter decrease than imports,” the statistics office said.

 

Government spending and consumer consumption increased in the second quarter, the office said.

 

The German data could spark downward adjustments of the second estimates for Eurozone GDP growth due at 09.00 GMT Wednesday. (Read the LiveSquawk News preview here.)

 

Two polls of economists said early Monday that the EU’s next round of estimates for Eurozone second-quarter GDP expansion will match the first numbers released on 31 July of 0.2pct on the quarter and 1.1pct on the year.


End of a ‘Golden Decade’

 

ING Chief German Economist Carsten Brzeski said, “Today’s GDP report definitely marks the end of a golden decade for the German economy. Since the end of the 2008/09 recession, the economy has grown by an average of 0.5pct quarter-on-quarter every quarter. In fact, the economy grew in 35 out of the last 40 quarters.

 

“However, under the surface of these impressive headline numbers, a worrisome trend has emerged. Since the third quarter of 2018, the economy has been in a de facto stagnation, with quarterly GDP growth at an average of zero percent.”

 

Andrew Kenningham, chief Europe economist at Capital Economics, said recent macroeconomic reports from Germany offered a glimpse into weakness in the quarter. “The set-back came as no surprise after we learnt last week that industrial production contracted by 1.5pct month-on-month in June and by nearly 2pct quarter-on-quarter in the second quarter. This in turn was partly due to yet another quarterly contraction in vehicle production.”


More Support For Dovish ECB

 

Flat or lower growth in Germany furthers validates the European Central Bank’s July shift to an easing bias.

 

ECB President Mario Draghi said less than a month ago that if the bank does move on interest rates by the end of the year, it will cut, with the market expecting the first reduction next month.

 

Draghi also noted that policymakers are studying a range of measures, including a restart of quantitative easing.

 

--- Eric Culp

Twiter: @EricCulpLS

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