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German growth halves in Q3

Thursday, November 24, 2016 - 01:41

The German economy halved its growth rate to 0.2 percent in the third quarter despite rising private consumption and higher state spending. Weak foreign trade slowed overall activity in Europe's biggest economy but businesses remained optimistic. David Pollard reports.

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Strikes in Germany may be keeping many of its planes from taking off. Its economy is far from grounded. The key IFO business sentiment indicator still at a two and half year high. But on growth, there are questions. GDP halving in Q3. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "Germany has actually seen a rise in its own consumer spending, so that's a big tick for the powerhouse of the European economy. The problem they're having as with so many others is what they refer to as foreign trade, and that has weakened slightly." And even the forward looking component of the IFO does hint at confidence slipping - as Germany approaches its own election year. (SOUNDBITE) (English) KLAUS WOHLRABE, IFO INSTITUTE, SAYING: "Right now we are not seeing a huge impact on the result of our poll after Trump's election. After the Brexit vote there was a two-month delay. That's when we noticed an increase in uncertainty. That could happen again." And if Italy is still a concern as it heads towards a key referendum, Spain, many hope, could be over the worst of its recent uncertainty. Either way, it maintained a strong bounceback in Q3 (+0.7). (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "Unemployment needs to come down further, particularly youth unemployment in Spain. But all things considered, given the difficulty of the political backdrop, let alone economic uncertainty, it's putting in a pretty good performance at the moment." But a new ECB review talks of new debt risks resulting from political shifts. German chancellor Merkel is getting ready to celebrate her eleventh Christmas in office. She may wonder what the twelfth will look like.