Full-year growth figures for the European Union’s largest economy, Germany, have been published and show that it missed growth projections of 1.8%, coming in at 1.5% in reality. The figure is sharply down on the 2017 full year growth figure of 2.2%, reflecting the impact of Trump’s trade war, concerns over regional fallout from the UK’s Brexit process and continuing concerns that global trade is slowing anyway.
The 2018 German growth figure is the worst performance from the European powerhouse economy since 2013. However, growth managed to come in above the (rolling) ten-year average figure of 1.2%. The 10-year average still incorporates the deepest part of the Global Financial Crisis, of course. Looking at things over a wider term exposes the (relative) weakness of the German economy currently: from 1971 to 2018, the average annual growth of the German economy comes in at 2.02%. The weakest growth saw a contraction of 6.8% (YTD Q1 2009) whilst the strongest growth was seen in Q1 1973, coming in at 7.2% (same basis).
The German economy fell into contraction in Q3 2018, shrinking by 0.2%. It is expected that Q4 growth will be positive, avoiding the economy falling into a recession which is defined as a period of two or more successive quarters where the economy contracts. In addition to the factors given above, which intensified as the year passed, the German economy was hit by a decline in the output of sales from the car production industry due (in part at least) to the application of new pollution standards in the wake of the VW emission scandal. Q4 2018 data is still to be officially released, but it is anticipated that it will show a modest growth of about 0.2%.
Germany is one of the world’s leading exporting nations which makes it vulnerable to a downturn in the global economy and a hostage to fortune should knock-on effects arise (as they have) from the predominantly China-US trade war.