German GDP stagnates as exports decline

Daniel Fowler
February 27, 2020

ING Diba bank analyst Carsten Brzeski however said the Ifo reading should be taken with "a pinch of salt", warning that Germany's export-oriented economy was uniquely vulnerable to trade upsets caused by the virus. The data suggested German economic activity to have remained weighed in 2019's fourth quarter ascribed to the decline in exports.

The virus has killed some 2,600 people and infected over 80,000 since it emerged in China late a year ago, and fears of a wider outbreak are growing after South Korea, Italy and Iran reported a spike in cases. Household consumption stagnated in the fourth quarter and government consumption rose only 0.3%, Destatis said. Consumer spending was flat, down from a 0.5% increase in the third quarter.

"The German economy seems unaffected by developments surrounding the coronavirus", Ifo chief Clemens Fuest said in a statement.

Europe's biggest economy has been losing momentum as its manufacturers linger in a recession prompted by a reduction in exports while its automotive sector faces disruption from a costly move to electrification.

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The German 10-year bond yield, which move inversely to its price, plunged almost 6 basis points to -0.490 percent, the long-term 30-year yield slumped 6-1/2 basis points to -0.019 percent and the yield on short-term 2-year suffered 4 basis points to trade at -0.680 percent by 10:40GMT. Private consumption is traditionally seen as a fundamental component that offers economic support. The growth rate was branded the weakest since 2013 when the eurozone was confronted with a debt crisis.

"It leaves the index below its level in December and still consistent with the economy not growing at all in the first quarter", said Andrew Kenningham at Capital Economics.

China is Germany's most important trading partner, with carmakers being especially dependent on Chinese supply chains and demand from China.

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