German economy close to recession

The German economy stagnated in the fourth quarter due to weaker private consumption and state spending, data showed on Friday, renewing fears of a recession just as Chancellor Angela Merkel’s conservatives are preoccupied with a search for a new leader.

Europe’s biggest economy has been losing momentum as its manufacturers linger in a recession prompted by a reduction in exports while its automotive sector faces disruption from an expensive shift to electric cars.

Private consumption and state spending have been providing growth impetus and, if those two sectors continue to weaken this year, the risk of recession will rise.

“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 preliminary data was an upward revision in the 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 declined considerably compared with the July-to-September period. Exports also weakened in the final three months of last year, it said.


Source: Reuters