World Economy

German Economy Slows in Q3

German Economy Slows in Q3German Economy Slows in Q3

German economic growth slowed to the weakest pace in a year last quarter, a reminder of the fragility of the eurozone’s recovery in a time of rising uncertainty.

Gross domestic product rose a seasonally-adjusted 0.2%, below the 0.3% forecast in a Bloomberg survey of economists. That follows an expansion of 0.4% in the second quarter. The economy grew 1.7% from a year ago.

As Europe’s biggest economy, Germany’s fortunes are key to the recovery of the 19-nation eurozone, where GDP figures later will likely show growth stuck at mediocre levels. The European Central Bank will review its stimulus program in less than four weeks, when it will have to factor in a global economic outlook characterized by the rise of populists critical of international trade deals.

“Germany’s numbers probably won’t change much for the overall eurozone figures,” said Ralph Solveen, head of economic research at Commerzbank AG in Frankfurt. “The economy is growing in the eurozone but still not quite helping the ECB meet its price-growth target of 2%. It’s probably not enough to satisfy them, and we think they will have to extend stimulus in December.”

In the Netherlands, growth unexpectedly accelerated to 0.7% in the third quarter from 0.6%, according to a separate report on Tuesday. Italy, the currency bloc’s third-largest economy, and Portugal will publish GDP date later, with figures for the eurozone due soon.

Expansion in the single currency area probably held at 0.3%, in line with a flash estimate and unchanged from the second quarter, according to a Bloomberg survey.

In Germany, domestic demand drove growth last quarter as both government and private consumption spending rose, the statistics office said. The global economy dragged on growth, with exports contracting slightly. Investment in equipment also slipped while construction climbed.

The Bundesbank has already noted that the economy cooled in the summer months—a phase it said was probably temporary—and recent data has showed a pickup in momentum. Business confidence rose to the highest level in more than two years and unemployment dropped to a record low.

Even so, risks may be mounting. The world economy “faces once again an abnormal degree of uncertainty,” ECB Vice President Vitor Constancio said in Frankfurt on Monday. He also warned against drawing “hasty, positive conclusions” from the response of financial markets to the US vote. The dollar climbed and bonds slumped as investors bet that US President-elect Donald Trump will follow through on a pledge to unleash a wave of fiscal stimulus.

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