Fri. Jan 15th, 2021

Germany avoids recession with surprise return to growth – business live

Rolling coverage of the latest economic and financial news, including German growth figures

10.36am GMT

Here’s a round-up of reaction to Germany’s economy growing by 0.1% in the last quarter, avoiding the recession which many analysts expected.

“We know uncertainty is a killer for the economy. UK growth was the slowest in a decade. Germany has only narrowly avoided a recession, but it’s not out of the woods just yet. Now the effects of uncertainty have become reality. Companies are having to deal with the consequences of the global economic meltdown – margins are squeezed, output is down and balance sheets are weak.

“With fewer than one in five CFOs willing to take on risk, we’ll see slashed budgets for companies going into 2020. People are going to start feeling the impact from fewer jobs and frozen wages as companies remain inhibited by the uncertain economic outlook.”

Growth surprised on the upside. The construction sector continues to run above capacity and is lending support to growth.

This doesn’t change our narrative. Underlying growth trend is weak and the economic outlook remains subdued. Germany avoided a technical recession but will continue to pose very low growth rates over the next year. Important trading partners like China, the US, Turkey and Sweden are experiencing an economic slowdown, and high-frequency indicators show the services sector slowing down. Employment prospects are also gloomy.

“The German economy avoided a technical recession in 3Q, by posting this morning a surprise positive +0.1% 3Q QoQ GDP growth (vs -0.1% expected). At the same time, however, 2Q GDP growth was revised downwards to -0.2% QoQ (from -0.1% QoQ previously). Effectively, it leaves the German economy close in stagnation.

…. That today’s number is better than slightly expected is potentially the worst of both worlds… not strong enough to assuage growth fears in the Eurozone and not weak enough to push Germany into a meaningful fiscal response.

10.32am GMT

Japan’s economy has also been hit by the US-China trade war and the weakening global economy.

Japan’s GDP grew at an annualized pace of 0.2% in Q3 QoQ vs 0.9% expected, stuttering from revised growth of 1.8% in the April-June period. H/T @Schuldensuehner

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