According to the latest figures, the German economy has shrunk by 0.2% in the last quarter, to 1.1%. This is the first time that Europe’s largest economy has fallen since 2015, and experts are blaming it on weaker exports than previously seen. Additionally, the issue of global trade disputes, for instance, the ongoing dispute with the US president, has continued to have a knock-on effect for European economies.
Furthermore, the eurozone economy has seen its weakest growth in four years. The eurozone’s GDP rose by 0.2%, while the economy of France grew by 0.4%, and Italy’s remained flat. The last three months have seen the slowest overall growth since 2014.
The European statistics agency noted: “The slight decline in GDP compared to the previous quarter was mainly due to foreign trade developments: provisional calculations show there were fewer exports, but more imports in the third quarter than in the second According to provisional calculations, exports were down while imports were up in the third quarter of 2018, compared with the second quarter of the year.”
“As regards domestic demand, there were mixed signals. While gross fixed capital formation both in machinery and equipment and in construction was higher than in the previous quarter, final consumption expenditure of households declined.”
Going forward, experts have warned that the German economy could continue to see some decline in the upcoming years. Earlier in the week, ZEW research institute said that some investors feared that this could a downward trend. Some have also predicted that there could be more problems in the car industry due to the introduction of new pollution standards.
“Both exports and consumer spending could rebound in the coming quarters as car producers make up for lost time and car spending increases accordingly,” said Jennifer McKeown, chief European economist at Capital Economics. She continued: “More fundamentally, the high level of consumer confidence, rising wage growth and the likelihood of a marked fall in inflation all point to a pick-up in spending growth ahead. But export growth will remain on a downward trend as global demand softens further.”
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