Steamship for the economy – gross domestic product down

steamship for the economy - gross domestic product down

Slowed by problems in the automotive industry, the german economy contracted for the first time in three and a half years.

Gross domestic product (gdp) fell by 0.2 percent in the third quarter compared with the previous quarter, according to the federal statistical office.

The wiesbaden authorities thus confirmed earlier data. The difficulties of the car industry, which is so important for germany, in switching to the new WLTP emissions test standard have left their mark on private consumption and exports. The cooling of the global economy was also a burden on germany as an export nation in general.

For the last time, the performance of europe’s rough economy had been sluggish in the first quarter of 2015. Despite the weak summer quarter, economists expect the upswing to continue, although it may not reach the high tempo of the boom year 2017.

"The contraction of the german economy in the summer will remain a blip," said k chief economist jorg zeuner, for example. However, growth will lose momentum: "the previously very strong economy, which peaked in 2017, is cooling down."

According to VP bank chief economist thomas gitzel, these are also temporary signs of a slowdown. "Despite everything, the coming GDP growth will not be a storm of glory," he said. "The global economy is weakening, and germany, an export powerhouse, is feeling the effects particularly keenly."

Uncertainty is currently being caused above all by the international trade conflicts fueled by US president donald trump. Economic researchers, international organizations and the federal government had recently lowered their economic forecasts for germany for this year and the coming year.

From july to september, exports steamrolled development. According to the figures, 0.9 percent less goods and services were exported from the federal republic than in the second quarter. Imports, on the other hand, increased by 1.3 percent.

According to economists, the problems in the automotive industry in particular left their mark. Because not all models were approved in time for new registration according to the WLTP standard, manufacturers had to reduce production. This weighed on exports and also had an impact on private consumption, which is an important driver of economic growth.

Private consumer spending fell by 0.3 percent compared with the previous quarter, partly due to the reluctance of households to buy new cars, as the statisticians explained. According to carsten brzeski, chief economist at ING in germany, higher energy prices may also have dampened consumer spending.

In principle, however, people in germany remain in a buying mood, according to economic experts. The economy will be supported by the continuing robust labor market with strong wage growth, for example, jungst, the organization for economic cooperation and development (oecd) predicted.

Positive impetus came from corporate investment in the third quarter. Expenditure on equipment such as machinery, appliances and vehicles increased by 0.8 percent. Gitzel explained that the main factor driving investment growth was the low interest rates in the euro zone, which had been lamented by savers. Companies, but also house builders, can get money more cheaply thanks to the interest rate lull.

The construction boom continued in the summer, with investments increasing by 0.9 percent. The industry’s order books are well filled. In september alone, the value of orders rose by 3.6 percent compared to august.

The state’s consumer spending, which includes social benefits and employee salaries, was reported to have increased slightly in the summer. Compared with the same period last year, price-adjusted gross domestic product increased by 1.1 percent in the third quarter.

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