Thursday, 02 April, 2020

German economy records zero growth in fourth quarter

Unimpressed German chancellor Angela Merkel at the launch of the Brandenburg special edition two euro coin in Berlin yesterday German economy records zero growth in fourth quarter
Ginger Lawrence | 16 February, 2020, 08:54

Data for December was revised down to show the so-called core retail sales rising 0.2% instead of jumping 0.5% as previously reported.

With the Trump administration still signalling a willingness to impose tariffs on the European Union the risk of a further slowdown in manufacturing sector activity appears high.

Fresh data from Germany indicated that the currency bloc's biggest economy flatlined in the fourth quarter after production plunged in its factories.

If the fourth quarter German gross domestic product falls short of forecast this could see Euro exchange rates trending sharply lower across the board heading into the weekend. This creeping realization is continuing to be priced into the Euro.

As the impact of the inflation uptick has already been effectively priced into the Euro anything short of a positive revision may have little impact on investor sentiment. The figure underlines the challenge facing the eurozone.

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Although the Commission left its growth forecasts unchanged it warned that the European economy still faces key downside risks, while indicating that Germany, Italy and France are likely to post the lowest growth for the year. The next ECB in March can now considered "live" with market expectations starting to build that the central bank may well loosen monetary policy further, or at least give increased guidance, to help prime the block's struggling economy. The world's fourth-largest nation, as measured by gross domestic product, has flirted with recession for several quarters. In July-September the growth was 0.3% and 1.4%, respectively.

Germany's economy stalled in the fourth quarter as government and household consumption slowed, the federal statistics agency Destatis said Friday.

Unless investors see renewed cause for confidence in the outlook of the Eurozone's powerhouse economy demand for the Euro looks set to weaken.

Even so, the potential for GBP exchange rate gains could still prove limited in the days ahead thanks to the persistent uncertainty surrounding the UK's future relationship with the EU.