Carsten Brzeski, chief economist at ING, points out that the German economy grew by only 1.5% YoY and had its weakest performance in five years in 2018.

Key Quotes

“An official estimate of fourth-quarter growth will only be available in February but with 1.5%, it looks as if a technical recession could only just have been avoided. At the same time, the statistical agency recorded a record high fiscal surplus of 1.7% GDP.”

“The main reason for the unexpected cooling of the economy in the second half of the year is cars. Missed deadlines for the admission of new emission standards have led to an enormous inventory build-up in the second and third quarter of the year and a consequently very weak sales and now production performances. Also, the announced ban on cars with old diesel engines for several German cities has not only weakened car sales but also led to precautionary savings of households over the summer months.”

“It currently looks as if the German economy could get away with one black eye but these days, economic strength in Germany doesn't come effortlessly.”