German economy shrinks in Q2

14 Aug 2019

Germany’s economy contracted during the second quarter, as waning exports weighed heavily, data published on Wednesday revealed. 

Manufacturers in the eurozone’s largest economy face mounting pressure against sluggish foreign demand and trade tensions, Reuters reports. 

According to the Federal Statistics Office, gross domestic product (GDP) tumbled 0.1% quarter-on-quarter, following a verified growth rate of 0.4% during the January-March period. 

The initial reading for second quarter data was in keeping with a projection of analysts polled by Reuters. 

Calendar-adjusted figures revealed the annual growth rate decelerating to 0.4% in the three months to June, from 0.7% in the previous quarter, surpassing the poll expectations of +0.1%. 

“The development of foreign trade slowed down economic growth because exports recorded a stronger quarter-on-quarter decrease than imports,” said the statistics office. 

Domestic demand contributed significantly as household consumption, government expenditure and gross fixed capital formation jumped on the quarter, the office said. 

The data showed activity in the construction sector falling during the April-June period, after it had lifted overall growth in the first quarter following a surprisingly mild winter. 

“For a year now, the German economy has been only crawling forward,” said Unicredit analyst Andreas Rees, adding that increasing doubt surrounding German exporters meant there would be little room for improvement during the last six months of 2019. 

“Besides Brexit, this is above all the U.S.-Sino trade dispute and possible U.S. tariffs on European cars,” Rees added. 

On the heels of the data, the yield on Germany’s benchmark 10-year government bond fell to an all-time low of -0.623%. 

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