Almost Zero Growth For German Economy In Last Quarter Of 2019

The last quarter of 2019 was a very poor one for the German economy, showed official figures for the country.

There was almost no change in the Gross domestic product (GDP) or the total production of goods and services, for the country in the last three months of last year compared to the previous quarter.

Germany, which is heavily dependent on exports, always twitches when there are issues in international trade and the poor fourth quarter performance shows a part reflection of a drop in exports.

In the same quarter a year ago, German GDP had clocked a growth of 0.4 per cent.

Even though there was some expansion in the industry, the growth rate of the German economy stood and 0.0 per cent when the figures provided by the German statistics office were rounded off to one decimal place.

A decline in exports was partly responsible for the sluggish performance of the economy during the quarter. In the October to December quarter, there was also considerable sluggishness in the investment in machinery and equipment.

While no explanation of the figures is offered the statistics office, it is most likely that the recent turmoil in international trade was to be blamed for the poor numbers.

It is likely that investment in plant and machinery in the manufacturing industry was down because of a question facing companies when deciding whether to invest or not – what are the likely barriers to international trade that the manufacturing companies are likely to face which could make it difficult for them to sell goods in foreign countries. Germany is the third largest exporter of goods in the world – after the United States and China – both of which are much larger economies.

Compared to most other developed economies, manufacturing contributes to a much larger extent to the German economy with about 20 per cent contribution compared to about 9 per cent for the United Kingdom and 10 per cent for the US.

Further, Germany also remained very well exposed to the trade tensions between the US and China and among other trading partners, particularly since Donald Trump assumed office as the P{resident of the US.

Germany was directly affected by the new tariffs that the Trump administration imposed on aluminium and steel while being indirectly impacted by the US-China trade war. This is because both the US and China are important export markets for Germany and any hit to their economies because of the trade war would also indirectly impact the German exports to those countries.

Further, the German economy would also be hit if Trump did implement his threat of imposing a 25 per cent tariff on all cars and auto parts that are imported into the US from the European Union.

The last two years have been bad for the German economy in terms of growth.

The economy has noted tow quarters when there has been a decline in GDP. However since these two quarter were not consecutive, therefore no formal or technical recession was declared. Technically an economy would be considered to be in recession if there are two straight quarters of negative growth.

(Adapted from BBC.com)

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