German GDP Stagnates In Q4, Eurozone Confirms 0.1pct Growth

- Analysts warn of ongoing weakness in German economy

- Eurozone likely to face meagre growth


Frankfurt, 14 February 2020 (LS NEWS) – German GDP flatlined in the fourth quarter of 2019, raising concerns that Europe’s largest economy and the Eurozone as a whole will continue to suffer from minimal economic activity this year.


Germany’s zero quarterly growth rate in the final three months of last year fell short of market expectations of a 0.1pct rise, but the country’s statistics office Destatis raised the third-quarter rate to 0.2pct from 0.1pct. Annual non-adjusted growth in the fourth quarter was 0.3pct, just above the 0.2pct estimate but well below the 1.0pct performance in the previous three months.


“With German GDP stalling in the last quarter of 2019, the economy began this year with even less momentum than most had expected,” said Andrew Kenningham, chief Europe economist at Capital Economics in a note. “We think the economy will continue to flirt with recession in the first half of this year.”


Friday’s release followed last month’s comments from a Destatis spokeswoman, who said Germany recorded a “small increase” in growth in the fourth quarter. According to the latest data, the German economy expanded by a few hundredths of a percentage point in the period.


A wide range of economists had warned that fourth-quarter German growth could turn negative following a surprisingly strong contraction in German industrial production in December, with some analysts predicting declines as large as 0.4pct.


“Today’s headline is disappointingly weak, but we had been fearing a lot worse given the awful hard data,” said Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics.


Ifo Business Expectations v. German GDP. Sources: Refinitiv, Capital Economics

Euro-area growth rate confirmed, but just barely

The second estimate of Eurozone GDP for the fourth quarter matched the first prelimiary reading of 0.1pct, but Brussels was forced to cut its growth rate, Vistesen said. “The euro area economy avoided a downward revision by the narrowest of margins; the quarter-on-quarter headline was adjusted down to 0.058pct from 0.094pct.


“These numbers don’t look pretty. The German economy stalled […] while GDP fell outright in Italy and France.”


The economic weakness could put the European Central Bank in a bind, he said. “Looking ahead, long-leading indicators suggest that the Eurozone economy should be about to turn a corner, but the coronavirus now means that the first quarter could well be a write-off. A dovish shift by the ECB is still very much in the cards next month.”


The ECB’s next rate decision is scheduled for 12 March.


Capital Economics’s Kenningham said, “Prospects for the Eurozone as a whole look poor for this year given the weakness of external demand, softening domestic demand and limited scope for policy support.”


--- Eric Culp, European Editor