German economy ‘flirts with recession’ as Q4 output stagnates

Monday, 17 February 2020 00:00 - - {{hitsCtrl.values.hits}}

BERLIN (Reuters): The German economy stagnated in the fourth quarter as both private consumption and state spending lost momentum, preliminary data showed on Friday, renewing fears of a recession.

Europe’s biggest economy has been losing momentum as its manufacturers linger in a recession prompted by weaker exports, an automotive sector grappling with an expensive shift to electric cars and US-China trade tensions.

Private consumption and state spending have been providing growth impetus, and if those two sectors continue to weaken this year fears of a recession would grow.

“We think the economy will continue to flirt with recession in the first half of this year,” Andrew Kenningham of Capital Economics wrote in a note.

One bright spot from the data was an upwardly revised third-quarter growth figure to 0.2% from a previously reported 0.1%.

The Federal Statistics Office said investments in the construction sector grew in the fourth quarter, while spending on machinery and equipment fell considerably compared with the July to September period. Exports also weakened in the final three months of last year, it said.

Chancellor Angela Merkel’s government has resisted calls for a fiscal stimulus to put the economy firmly back on a growth path.

Those calls are likely to grow louder if the economy continues to lose steam, especially as Germany’s manufacturers are likely to face headwinds from the economic impact of the coronavirus outbreak in China.

Kenningham said the coronavirus, which is impacting both the global supply chain and demand from China, could result in weaker German growth in the first quarter of this year.