Germany just narrowly avoided recession — but a downturn 'is more likely than not' in 2020
- Germany's economy narrowly avoided recession in the third quarter, as GDP rose 0.1%.
- The European powerhouse economy declined in the second quarter 0.2%, so any further decline would put Germany in a technical recession.
- Consumption led the rise through household and government expenditure, according to official data.
- One economist said: "The economy will probably contract slightly next year - so a recession may have been postponed, rather than avoided altogether."
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Germany's economy narrowly avoided recession, as data released on Thursday by the German Federal Statistics Office (Statistisches Bundesamt) shows that GDP increased 0.1% in the third quarter.
The German economy shrank 0.2% in the second quarter, according to official data, so any fall in the third quarter would mean Europe's largest economy is in a technical recession.
Much of Germany's slowing output is due to down to a steep decline in manufacturing - the largest sector of the German economy. New orders for German factory equipment dropped due to Brexit and the trade war.
Andrew Kenningham, chief Europe economist at Capital Economics said Germany isn't in the clear just yet.
"The economy will probably contract slightly next year - so a recession may have been postponed rather than avoided altogether," he said in an email.
"While today's data release comes a bit of a relief, prospects for the coming quarters remain poor," Kenningham said. "Business surveys for October, such as the Composite PMI and Ifo Business Climate Index, suggest that the economy may well contract in Q4."
"And with policymakers unlikely to loosen fiscal policy significantly, we think a mild recession is more likely than not in the coming year."
Germany's economy also acts as a lynchpin in the European economy, if Germany falls into recession, the rest of Europe is also at risk.
However, just last week data from the Statistisches Bundesamt showed that the country posted a surprise rebound in manufacturing as new orders rose 1.3% in September, following a 0.4% drop in August.
The data released on Thursday showed that growth in the third quarter was led by consumption, with household and government consumption expenditure increasing. Exports also rose on the last quarter, while imports remained flat.
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