*

upload_article_image

German economy grows slightly in 3Q, staving off recession

Germany’s gross domestic product returned to modest growth in the third quarter, the Federal Statistical Office reported Thursday, staving off a widely-feared recession in Europe’s largest economy.

The Wiesbaden-based agency said the economy grew 0.1% in the July-September period over the previous quarter, largely driven by public and private consumption. Exports rose as well, while imports remained roughly at the second quarter level, the agency reported.

It said, however, that the second quarter contraction was greater than preliminary figures had shown, with the economy shrinking in the April-June period by 0.2% compared to the 0.1% originally reported.

Two straight quarters of declining output is considered a technical recession, which many economists had predicted that Germany had entered in the third quarter.

A week ago, the German government’s independent panel of economic advisers reported that a 0.1% third-quarter contraction was likely.

Though they said there were no signs of a “broad, deep recession,” the panel also said there was no sign of a “strong revival” in the fourth quarter. The five-member panel cut its economic forecast to growth of 0.5% this year and 0.9% in 2020, compared with its forecast in March of 0.8% this year and 1.7% next year.

And even though the recession has been averted, the numbers show Germany is in a de facto stagnation, and its export-driven economy still faces headwinds due to international uncertainty.

Services companies and the jobs market have held up well in Germany, but the industrial sector, led by automobiles and factory machinery, has seen declines amid trade tensions.

Among other things, the dispute between U.S. President Donald Trump and the Chinese leadership over China's trade surplus with the U.S. has dampened trade and industrial output by raising uncertainty about whether and where more tariffs might be imposed. Another negative is uncertainty about the date and terms of Britain's departure from the European Union.

In their report, the government economists cautioned that a no-deal Brexit could yet chop 0.3 percentage points off next year's German growth, reducing it to 0.6%.

Britain is currently scheduled to leave the European Union by the end of January, but whether, how and when it leaves will depend on the outcome of an election next month.