Modest growth in the German economy helps it avoid a recession

Europe’s biggest economy expanded by 0.1% in the third quarter, revised down from the first estimate of a 0.2% rise.

After a subdued performance in the first six months, the German economy began the second half of the year with modest growth. The GDP increased by 0.1% in the third quarter, compared to the previous three months, according to the country’s statistical office.

The final figure was less than the initially estimated 0.2% growth in the three months to 30 September. Still, it rebounded from a 0.3% contraction in the previous period as the country avoided recession (two consecutive quarters of contraction).

The main boost was household consumption, which grew by 0.3% after declining 0.5% in the previous three months. Government spending slowed down, considerably from 1.6% to 0.4%. There were substantial decreases in the manufacture of machinery and equipment and of chemicals and chemical products, not least because of this, there was a substantial fall in exports of goods (-2.4%).

Overall, net trade had a negative effect on the GDP, as imports hardly rose (by 0.2%) but exports dropped considerably, by 1.9%.

Compared to last year’s third quarter, the economy fell by 0.3% (price and calendar adjusted), worse than the estimated 0.2% drop.

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Meanwhile, the purchasing managers’ index (PMI), a survey-based indicator of business conditions, which shows the current sentiment of various sectors in the economy, came in lower than expected not only in Germany but in France too.

The HCOB Flash Germany Composite PMI came in at 47.3 in November (below 50 indicates contraction) showing that business activity fell again for the fifth month running.

The manufacturing flash PMI was 43.2, signalling a deep contraction in the German manufacturing sector in November, coupled with the first decline in services activity in nine months (49.4).

The French business sentiment has been declining for months, the composite PMI for November came in at 44.8, worse than estimated before and marking the third consecutive month of decline. Manufacturing and services both shrank, to 43.2 and 45.7 respectively.

For the French manufacturing sector, this is the 22nd consecutive month of contraction and is mainly fuelled by drops in the automotive, construction, and cosmetic industries, that struggle with shrinking orders domestically and internationally too.