Figures released yesterday showed that the German economy grew at its slowest rate in five years in 2018. The eurozone’s largest economy expanded by just 1.5% throughout last year, down from growth of 2.2% in 2016 and 2017. The Federal Statistics Office said that while the economy shrank in July to September, it probably grew in October to December, suggesting that Germany narrowly avoided falling into a technical recession.
There are several reasons for the disappointing data, including a weaker global economy, fears that the UK will leave the EU without a deal, and new car emissions tests. Germany’s car industry has struggled to meet the tougher standards. The economy ministry believes that growth will keep expanding throughout 2019 which, if true, would put paid to fears of a recession, but nothing is certain at the moment.
We also saw the eurozone’s balance of trade figures for November 2018, which showed the trade surplus narrowed to €19 billion from €23.4 billion in the same month the previous year. This was much better than the €13.7 billion the markets had been expecting, although any optimism surrounding this release is curbed by the German GDP figures.
Today we will see in final reading of the German inflation rate for December, which is expected to drop to 1.7% from 2.3%. On Thursday, we will see the eurozone’s inflation rate which is also expected to drop, this time to 1.6% from the previous month’s 1.9%.