Germany avoided recession in third quarter thanks to exports, spending
August 11, 2020

Germany avoided recession in third quarter thanks to exports, spending

BERLIN- Strong exports, state spending and consumers helped the German economy avoid a recession in the third quarter, detailed data showed on Friday, confirming a preliminary reading of a 0.1% expansion on the quarter.

The Federal Statistics Office said exports grew 1% in the quarter, which meant that net trade contributed 0.5 percentage points to overall economic expansion.

Europe’s biggest economy is going through a soft patch as its export-oriented manufacturers languish in a recession linked to trade frictions, a struggling car industry and uncertainties over Britain’s planned departure from the European Union.

Conservative Chancellor Angela Merkel’s right-left coalition government has rejected calls from industry groups and economists for a stimulus package to put the economy firmly back on a growth trajectory.

In its 10th successive year of growth, the economy has been relying on strong consumption as exports weaken, which resulted in a second quarter GDP contraction of 0.2%.

“Particularly the strength of private consumption remains an important anti-recession insurance for the economy,” Carsten Brzeski of ING wrote in a note. “Private consumption has been growing consecutively every quarter since the start of 2014.”

The data showed that private consumption grew 0.4% and state spending by 0.8%, which translated into each segment contributing 0.2 percentage points to growth.

Acting on a programme agreed between Merkel’s conservatives and their Social Democrat coalition partners after an election two years ago, the government has increased allowances for families, students and pensioners. This comes in addition to tax cuts and more spending on infrastructure.

(Content and photos syndicated via Reuters)

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