FRANKFURT AM MAIN: The German economy is “in better shape” than feared, analysts said Friday, after detailed data for the fourth quarter of 2018 showed a dashboard with few red lights despite flat growth.
Figures from federal statistics authority Destatis confirmed preliminary readings of 0.0 percent expansion between October and December, adjusted for price, seasonal and calendar effects.
“German economic growth has stalled,” the statisticians said in a statement, with the flatline in the final three months of last year following contraction of 0.2 percent between July and September.
That meant Europe’s powerhouse only just escaped a technical recession — two successive quarters of negative growth — in the second half of 2018.
Nevertheless, “the German economy is in a better shape than its current reputation,” economist Carsten Brzeski of ING Diba bank commented on the release.
Private consumption, government spending and investments all picked up, while both imports and exports grew at around the same pace, leaving the country’s trade surplus almost flat.
“None of the traditional growth components” were negative, Brzeski noted, arguing the data showed the massive car industry’s struggles to adapt to new tougher emissions tests were the main culprit for the slowdown.
Stocks of newly-built cars had piled up in the second and third quarter, he pointed out, before being finally delivered in the fourth after passing the so-called WLTP process introduced in September.
“Inventories were a massive drag” on growth in the final three months, Unicredit analysts agreed, calculating the effect slowed the economy by “a whopping 0.6” percentage points.
“The temporary problems in the car industry mask solid fundamentals,” Brzeski said.
“In a couple of months, the German economy should be able again to show its true colors.”