German Economy Contracted in 2Q Under Trade War Pressure

14/08/2019 06:15:09 Economic Indicators

Germany’s economy shrunk by 0.1% in the three months to June, caught in the cross-fire of the trade war between U.S. and China.

Preliminary figures released on Wednesday by the state statistics office Destatis also showed that the annual rate of growth in Europe's largest economy slowed to zero, the worst performance since 2013, when the euro zone was still struggling with the hangover from its sovereign debt and banking crisis.

Gross domestic product still rose 0.4% on the year when adjusted for the lower number of working days this year.

The numbers were in line with consensus forecasts, and follow months of disappointments from the industrial sector, traditionally the locomotive of the euro zone’s economy. The hardships of the manufacturing sector have slowly started to filter through to other sectors, with service sector activity slowing in both of the last two months and domestic orders to manufacturers also starting to weaken.

"Today’s GDP report definitely marks the end of a golden decade for the German economy," ING economist Carsten Brzeski said in a note. "Trade conflicts, global uncertainty and the struggling automotive sector have finally brought the German economy down on its knee."

Today’s GDP report definitely marks the end of a golden decade for the German economy.
Today’s GDP report definitely marks the end of a golden decade for the German economy.

Brzeski noted, however, that it was the uncertainty created by trade conflicts, rather than their direct effects, that was principally to blame. In addition the U.S.-China trade conflict, Germany has also been affected by the U.K.'s endless Brexit drama, which has caused investment to collapse in one of Germany's biggest export markets over the last three years.

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