The German economy slips sharply in the third quarter

FRANKFURT – The German economy slowed sharply in the third quarter, as automakers struggled to adjust to a new emissions control protocol, and the struggles against trade rules were undermining exports.

The new data released Wednesday showed that Europe's economic power had recorded its worst performance in five and a half years, according to the Federal Statistical Office.

Gross domestic product – the broadest measure of goods and services produced in an economy – fell 0.2% quarter-on-quarter, or an annualized rate of -0.8%, according to the bureau. This is the lowest rate since the first quarter of 2013, well below the 3.5% growth recorded in the third quarter in the United States in annualized terms.

True, the German economy is not going to collapse. Economists said the weak result was largely due to temporary factors, including bottlenecks during the approval of pbadenger cars as a result of the new WLTP emission control protocol. The unusually low water levels of the Rhine, major transport route for oil and other goods, have further reduced activity.

"In the fourth quarter, the German economy will experience further growth, simply because car manufacturers are likely to gradually increase their production," said Ralph Solveen, an economist at Commerzbank.

To illustrate the recent struggle of automakers to adopt new standards, the production of vehicles and parts decreased by more than 7% in the third quarter compared to the previous period, according to statistics.

Nevertheless, the export-dependent German economy has lost momentum compared to last year, with growth of 2.2%, as increased trade between Washington and Beijing has dampened foreign demand.

"Barriers in world trade have worsened," said Stefan Schneider, an economist at Deutsche Bank. This is a matter of concern because "in Germany, weak exports tend to hit investment with a relatively short delay," he said.

German statistics said that the decline in Germany's gross domestic product in the third quarter was largely due to the evolution of foreign trade, as exports fell and imports rose from the second quarter.

In October, according to the results of a survey conducted among 2,300 manufacturers by the Ifo Institute, a think tank on the economics of supply, the forecasts of the market, the price of the goods, and the price of the goods. Manufacturing exports reached their lowest level in nearly two years in October.

The government's economic advisers are now forecasting growth of only 1.6% this year, compared with 2.3% previously forecast. For 2019, they predict a growth of 1.5%.

"Economic activity has clearly surpbaded its peak," said Schneider, who expects a 1.3% growth in 2019.

Write to Nina Adam at [email protected]