German economic growth rebounds slightly in Q4 2019, decline in industrial production likely to slow in months ahead

The German economy has rebounded slightly in the fourth quarter of 2019 compared with the third quarter, according to the Federal Statistical Office (Destatis). For the whole of 2019, the German economy grew 0.6 percent, as anticipated by the majority of economists. Nevertheless, the fourth quarter GDP was better than expectations.

Consumption expenditure mainly drove the economic growth in 2019. Household final consumption expenditure rose 1.6 percent year-on-year, while government final consumption expenditure rose 2.5 percent. Gross fixed capital formation rose considerably as well. Gross fixed capital formation in construction rose 3.8 percent year-on-year. Strong rise was particularly seen in civil engineering and housing construction. Gross fixed capital formation in other fixed assets also rose strongly by 2.7 percent.

The outlook for the first quarter of 2020 appears to have upside risk due to mild weather, noted Commerzbank. Industrial production has fallen until recently; however, the trend in new orders has been moving sideways since the spring. Survey-based leading indicators such as the Ifo business climate and the purchasing managers’ index have stabilized since the autumn, although they have not yet sent an upswing signal.

“All of this suggests that the decline in industrial production should slow in the coming months. We therefore expect GDP to grow slightly by 0.1 in Q1 2020, although it could also be somewhat higher because construction benefits from the unusually mild weather in January”, added Commerzbank.