Europe's biggest economy grew by just 0.6% in 2019

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
A technician at the Badische Stahlwerke steel plant in Kehl, Germany. Photo: Vincent Kessler/Reuters

Data from Germany’s federal statistics office on Wednesday revealed that Europe’s biggest economy expanded by 0.6% in 2019. This was in line with analysts’ expectations, but highlights how the global slowdown, including China’s cooling economy, and the US-China trade war have taken their toll on the export-reliant German economy.

Last year’s GDP growth was the lowest in the past six years — since the 0.4% growth it posted in 2013 — and significantly lower than 1.5% in 2018, and 2.2% in 2017.

"The golden decade Germany has seen for growth is gradually coming to an end," Holger Schmieding of Berenberg bank told AFP.

Strong domestic consumption and an unabated boom in construction both buoyed the German economy in 2019, and helped it narrowly avoid a recession for the year. However, its key manufacturing sector is technically in recession and struggling with shrinking orders from abroad.

“The German economy still has two faces: a strong domestic one on the back of record high employment, consumer and government spending, and a weak industrial one on the back of the global manufacturing slowdown and its sector-specific problems in the automotive industry,” said ING chief economist Carsten Brzeski in a note.

The outlook for the coming year is reasonably positive, however, with the Bundesbank expecting 2020 growth to be about the same as 2019.

"The big question is: how long will the domestic economy last?" OECD economist Nicola Brandt told Reuters. "If the uncertainties are not eliminated, it can spill over onto the domestic economy."

Pressure is mounting on the government, which announced this week that it had a budget surplus of €13.5bn (£11.6bn, $15bn) at the end of 2019, to start pumping investment into everything from the country’s crumbling infrastructure, to education, digitisation, and even a reduction in income tax.

Today, at a car summit in Berlin, the automotive industry will tell the government it needs billions in financial support to implement the huge transition to electric cars.