Germany squeaks past recession with slight third-quarter growth

Germany defied forecasts of a second quarterly contraction in a row in July-September with inching economic growth, official data showed Thursday, narrowly escaping a recession but with no all-clear for its trade war-battered industries.

Gross domestic product (GDP) expanded 0.1 percent quarter-on-quarter, federal statistics authority Destatis said, beating forecasts of a 0.1 percent contraction from analysts surveyed by Factset.

The statisticians also revised figures for the first half of the year, saying the economy shrank by 0.2 percent in April-June, rather than 0.1 percent as previously reported, and grew 0.5 percent in the first quarter, 0.1 percentage points faster than thought.

As in previous quarters,  “positive impulses came above all from consumption” by households and the state, Destatis said in a statement.

Exports and construction also expanded, while investments in new equipment fell compared with April-June.

Third-quarter growth was  “a hefty, but happy surprise,” analyst Jens-Oliver Niklasch of LBBW bank commented.

“In recent months, there were growing hints that other economic sectors were not infected by weakness in industry.” Manufacturing has stuttered in recent months, with a 1.3-percent September drop in output contributing to that month’s 0.6-percent overall fall in industrial production.

German industry, which is mainly oriented towards exports, has suffered months of headwinds from the US-China trade war, President Donald Trump’s threat of US duties on European car imports and Brexit uncertainty.

The German government is expecting just 0.5 percent growth this year and last month revised down its projections for 2020 to a 1.0 percent expansion, compared with previous forecasts of 1.5 percent.

 Industry’s stumbles and fears of recession have revived debate in Germany about whether the government should stick to a self-imposed rule to keep the budget balanced -- a dogma known as the  “black zero”.