German economy contracts on weak foreign trade, auto bottleneck

The German government had flagged a weaker third quarter last month, citing bottlenecks in the car sector. (AFP)
Updated 14 November 2018
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German economy contracts on weak foreign trade, auto bottleneck

  • The third-quarter dip in GDP was the first time the economy has contracted since the first quarter of 2015
  • Investors do not expect the German economy to recover rapidly from a weak patch in the third quarter

BERLIN: The German economy contracted for the first time since 2015 in the third quarter as global trade disputes swung the traditional export growth engine of Europe’s largest economy into reverse, raising concerns that a near-decade-long expansion is faltering.
Gross domestic product (GDP) in Europe’s biggest economy contracted by 0.2 percent quarter-on-quarter, the Federal Statistics Office said on Wednesday. That compared with a Reuters forecast for a contraction of 0.1 percent.
Compared with the same quarter of the previous year, the economy grew by 1.1 percent from July to September, calendar-adjusted data showed. Analysts polled by Reuters had expected 1.3 percent.
“The slight decline in GDP compared to the previous quarter was mainly due to foreign trade developments: provisional calculations show there were fewer exports but more imports in the third quarter than in the second,” the Office said.
The third-quarter dip in GDP was the first time the economy has contracted since the first quarter of 2015.
The government had flagged a weaker third quarter last month, citing bottlenecks in the car sector stemming from the introduction of new pollution standards known as WLTP as a factor.
“Germany doesn’t have an economic problem but rather an auto sector problem. Due to the sluggish certification of cars, car production had to be noticeably reduced, with collateral damage for other sectors too,” said Andreas Scheuerle at DekaBank.
However, the ZEW research institute said on Tuesday that investors do not expect the German economy to recover rapidly from a weak patch in the third quarter.
Concerns are growing in the German economy, which is in its ninth year of expansion, about the impact of global trade disputes and Britain’s departure from the European Union.
In addition to angst about the impact of US President Donald Trump’s abrasive trade policy, German firms are concerned about instability at home where Chancellor Angela Merkel’s awkward ‘grand coalition’ has come close to collapsing twice.
Carsten Brzeski, an economist at ING, said that even though he expected the auto sector to rebound in the fourth quarter, the GDP figures for the July-September period were a “wake-up call that political stability and strong growth are by no means a given.”
“The poor export performance, despite a weak euro exchange rate, suggests that trade tensions and weaknesses in emerging markets could continue to weigh on Germany’s growth performance,” he said in a research note.
Last month, Germany’s DIHK Chambers of Industry and Commerce cut its 2018 growth forecast to 1.8 percent from 2.2 percent and predicted a slowdown to 1.7 percent next year as the economy faces mounting risks at home and abroad.


US-Saudi business council reports $13bn in contracts

Updated 24 May 2019
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US-Saudi business council reports $13bn in contracts

  • Improved oil prices, combined with a government focus on spending, contributed to the rise, the council said

LONDON: The value of joint Saudi-US contracts rose to $13 billion in the first quarter of 2019, according to a business council report.

That marked the highest value of awarded contracts since the first quarter of 2015, the US-Saudi Arabian Business Council said.

The value of contracts awarded during the first quarter amounted to about half of the total value in all of last year, it added.

The contracts “included many vital projects, notably in the oil, gas, water and transport sectors,” Abdallah Jum’ah, the co-chair of the council, was reported as saying by Asharq Al-Awsat.

Energy was the top sector, with $3.1 billion of the value of contracts awarded, with many struck by Saudi Aramco. 

Improved oil prices, combined with a government focus on spending, contributed to the rise, the council said.

The construction sector also looks set for a recovery after many projects were put on hold due to the oil-price crash.

“If the pace of awarding construction contracts witnessed during the first quarter of 2019 continues for the rest of the year, the index of awarding construction contracts may return to the range we witnessed before the canceling and postponing of mega projects due to lower oil revenue,” the council said.