Carsten Brzeski, Chief Economist at ING, explains that the worst performance of the German economy since 1Q 2013 was just confirmed as the economy shrank by 0.2% quarter-on-quarter.
Key Quotes
“On the year, the economy still grew by 1.1%. While the headline figure remained unchanged, the statistical agency now also released the different components. The shrinking of the economy was mainly driven by declining private consumption (-0.3% QoQ) and negative net exports. In particular, private consumption disappointed, with the first drop since the end of 2013.”
“The disappointing performance of the German economy in the third quarter can be explained by several one-off factors but also some more worrying structural developments.”
“Expect a gradual rebound in the months ahead.”
“Looking ahead, the late-cycle economy is likely to fluctuate between hopeful and worrying news and developments. Low interest rates, a weak euro and some fiscal stimulus, as well as the reversal of adverse one-off factors, are strong arguments in favour of a growth rebound in the coming quarters. At the same time, however, dropping capacity utilisation and increasing external risks put a lid on any upside potential.”
“Based on economic fundamentals, the outlook for the German economy remains rosy but don’t expect a V-shaped rebound, rather a continuation of the recent roller coaster ride.”
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