Slow growth in Germany sparks EU-wide recession fears

14 Aug 19

The German economy shrank in the second quarter of this year, fuelling fears of a European-wide recession as growth across the EU slows.

Despite increased private and public spending, gross domestic product in Germany was down 0.1% between April and June from the previous quarter.

This was because of decreased exports due to the US-China trade war slowing world trade, and to declining investment in construction, according to the German Federal Statistical Office.

Chief Europe economist at Capital Economics Andrew Kennington said German trade might experience a slight uplift ahead of Brexit, as it did before the previous deadline in March, which could improve the numbers in the third quarter.

He said: “We estimate that there was a small boost of about 0.1% in the first quarter, and we can see very clearly that there was an increase in January, February and especially March. But that was unwound in Q2.

“Whether it will be as large again we don’t know. We will just have to wait and see.”

Although, he added that this would not be a “comfort in the long run” and that this prediction was “clutching at straws”, forecasting that the German economy would take significant hit in the event of a no deal Brexit.

“I think what would happen if there is a no deal Brexit is a large negative effect on Germany. But that’s even more difficult to estimate.”

Senior economist for Europe at German financial services giant Allianz SE warned that the risk of a recession in the country was “high”.

Eurostat figures out today showed growth fell in the second quarter to 0.2%, from 0.5% in the first, across EU countries.

The UK (-0.2%) and Sweden (-0.1%) were the only countries to join Germany in having shrinking economies, but other major countries like Italy (0%) and France (+0.2%) experienced stagnant or lacklustre growth.

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