German economy stagnates

Business | 14 Feb 2020 6:51 pm

Growth ground to a halt at the end of the year in Germany, Europe’s largest economy, as manufacturing remained in a slump and exports fell.

The flat reading underlines the challenge facing the broader eurozone economy as it struggles against headwinds from the U.S-China trade dispute and Britain’s departure from the European Union.

The state statistics agency said today there was zero growth in the fourth quarter and a mediocre 0.6 percent increase for the whole year. The figures did not change the disappointing reading for the entire eurozone of 0.1 percent growth during the fourth quarter.

Germany’s troubles are a central problem for the 19-country eurozone economy and the European Central Bank, which is trying to stimulate flagging growth and inflation with negative interest rates and bond purchases with newly printed money.

Germany has been a manufacturing and export champion in recent years but those areas have been sluggish. Consumer spending and services businesses have held up better and kept the country out of recession.

The three biggest economies in Europe all stagnated or shrank in the last three months of the year — number 2 France saw output contract, albeit by a modest 0.1 percent while heavily indebted Italy shrank 0.3 percent.

Carsten Brzeski, chief economist at ING Germany, said recent hopes for a modest upswing were looking a little premature at this point.

“In general, the German economy remains stuck between solid private consumption and a paralyzed manufacturing sector,” he said in a note.

Slowing global trade and the uncertainty caused by the U.S.-China conflict over trade have been one headwind. Another is structural change in industry, particularly the auto business, where companies must sink billions into developing electric cars and new services based on smartphone apps, both to meet regulatory pressure for lower greenhouse gas emissions and to head off competition from new entrants from the tech industry.-AP

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