Germany : GDP swerves off track

CHART OF THE WEEK

Germany’s third-quarter GDP (1) fell a sharp 0.8% on an annualised quarterly basis, the first fall in growth since the first quarter of 2015. The Federal Statistical Office of Germany has yet to release a breakdown of the numbers but did indicate that exports and consumption had a negative impact. On the positive side, investment remains in good shape.

OUR ANALYSIS

While the PMI (2) indices have indeed fallen back in recent months, they are consistent with a growth rate close to 1.5–2.0%. Most of the third-quarter drop is likely due to WLTP (3)-related disruptions in the car-manufacturing sector.

In fact, based on the industry’s new vehicle data, a crude estimate puts the drop in car production at almost 20% compared with the previous quarter (not annualised). With the sector representing almost 5% of German GDP, this impact corresponds to the gap between Germany’s growth trend in recent quarters (roughly 2%) and the latest third-quarter figure.

October’s numbers are showing a rebound in production as new vehicles progressively become WLTP compliant, and we should see fourth-quarter growth back on track.

GDP (1): main economic index measuring the economic production inside a given country.

PMI (2): Purchasing Managers’ Index, an indicator of economic health for manufacturing and service sectors

WLTP (3): Worldwide harmonised Light vehicles Test Procedures

 

The opinion expressed above is dated November 15th 2018, and liable to change.

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Julien-Pierre Nouen

Directeur des études économiques et de la gestion diversifiée