Home Economics German GDP Falls Amid Trade Wars Woes

German GDP Falls Amid Trade Wars Woes

Stockholm (Ekonamik) – During the second quarter of 2019, Germany’s economy shrank by 0.1% vis-a-vis the previous quarter (in real terms, seasonally and calendar adjusted), according to Destatis, the German statistical agency. The German economy was flat on the same quarter a year earlier (in real terms) and grew by 0.4% on the same quarter a year earlier (in real terms and calendar adjusted terms).

On quarter-on-quarter real terms and adjusted for seasonal and calendar variations, the main contribution to the economic contraction experienced by Germany came from foreign trade. “The development of foreign trade slowed down economic growth because exports recorded a stronger quarter-on-quarter decrease than imports,” according to the statistical report.

“Trade conflicts, global uncertainty and the struggling automotive sector have finally brought the German economy down on its knee,” commented Carsten Brzeski, Chief Economist ING Germany. “In particular, increased uncertainty, rather than direct effects from the trade conflicts, have dented sentiment and hence economic activity,” said the Chief Economist, noting that “the resilience of the domestic economy to external shocks is crumbling” under  the weight of “profit warnings, first lay-offs, an increase in short-time work schemes, falling consumer confidence and weaker activity”. The recommendation was clear: “Germany needs a two-pillar stimulus package: a short-term stimulus and an increase in the long-run growth potential. The buzzwords are well-known: digitisation, climate protection, energy transition, infrastructure and education.”

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“The pressure on the government to act will likely increase but abandoning the ‘Black Zero’ has a big political cost that no party is ready to shoulder, especially ahead of regional elections in September and October,” noted Nardia Gharbi, Economist at Pictet Wealth Management. The trend in the latest German data will clearly ring more alarm bells at the European Central Bank (ECB), reinforcing our view of significant ECB action in September.”

Picture from Pixabay

Filipe Wallin Albuquerque
Filipe Wallin Albuquerque
Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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