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Researchers at UOB Group assessed the recent publication of advanced figures for Q2 GDP in the euro area and Germany.

Key Quotes

“Economic growth across the Eurozone slowed in the second quarter, figures from Eurostat confirmed on Wednesday. GDP came in at 0.2% q/q, down from 0.4% q/q in the first quarter of the year and in line with the first estimate. Over the year, GDP came in at 1.1% y/y for the second quarter, down from 1.2% y/y in the first quarter. Eurostat is slated to publish detailed GDP data for the second quarter on 6 September”.

“Weakness in Germany and Italy were the main drivers behind the slowdown in the Eurozone, whilst Spain and France also witnessed a moderation in their economies. Notably, Germany’s GDP shrank 0.1% q/q in the second quarter of the year, confirming the lackluster performance of the German economy, which was hit by rising trade fears, the slowdown of Chinese imports and home-grown industrial and economic problems. The GDP decline puts Germany at risk of a technical recession this year. Annual growth slowed to 0.4% y/y from 0.9% y/y in the first quarter”.

“Germany’s shrinkage in GDP growth marks the end of a decade of expansion in Europe’s biggest economy, which has grown by an average of 0.5% q/q every quarter since the end of the 2008-2009 recession, expanding in 35 of the last 40 quarters”.

“Overall, the health of Europe’s largest economy is significant to the rest of its partners, and the slump in the German economy has already had an impact on its neighbours. This further reinforces the case for another round of monetary easing by the European Central Bank (ECB) next month, which could be announced at one of the last policy meetings of outgoing ECB President Mario Draghi. The irony is German officials and public opinion have long criticized the ECB’s policy, arguing that negative interest rates in place since 2014 are hurting a nation of savers; however, now the German economic backdrop adds to the case for the ECB to further loosen its monetary policy”.