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Carsten Brzeski, chief economist at ING, notes that the German economy avoided a technical recession in the third quarter, growing by a surprising 0.1% quarter-on-quarter.

Key Quotes

“At the same time, however, 2Q GDP growth was revised downwards to -0.2% quarter-on-quarter, illustrating that the economy is in a de facto stagnation. 1Q GDP growth was revised upwards to +0.5% QoQ, from +0.4% QoQ. On the year, the economy grew by 0.5% (calendar adjusted) in the third quarter.”

“Further GDP details will only be released at the end of the month but according to available monthly data and the press statement from the German statistical office, both public and private consumption, as well as construction and exports, were the main drivers of growth. Investments were the main drag.”

“Recession or not, the German economy has fallen into a de facto stagnation, with quarterly GDP growth averaging a meagre 0.1% QoQ since the third quarter of last year.”

“Looking into 2020, it looks as if either the cyclical factors weighing on German industry will dissipate somewhat, with the entire economy rebounding, or the domestic part of the economy will also slow down. Either way, don’t forget that the structural challenges will not quickly and easily disappear, keeping a clear cap on any German rebound in 2020.”

“All in all, the German economy has escaped a technical recession at the very last minute. However, despite any short-term relief, there are still very few reasons to be overly cheerful. While a growth crisis still looks unlikely, a longer period of stagnation is still in the cards.”