German economy flatlines as eurozone growth hits seven-year low

Growth in the Eurozone grew by only 0.1 per cent in the last quarter, dragged down by weakness in its three largest economies.

The German economy stagnated in the fourth quarter, while France and Italy contracted 0.1 per cent and 0.3 per cent respectively.

Statistics body Eurostat reported that the 0.1 per cent growth is down from the 0.3 per cent across the continent in the third quarter.

Read more: EU leaves eurozone growth forecasts unchanged

Figures released by the statistics body Destatis released earlier today showed that German GDP was unchanged in the quarter despite economists forecasting a rise of 0.1 per cent.

Destatis reported that both household and government spending slowed down in the fourth quarter.

Germany has been particularly exposed to the ongoing trade war between US President Donald Trump and China. Destatis reported that exports were slightly down on quarter, while imports of goods and services increased.

Joshua Mahony, senior market analyst at IG said: “The German economy has gone from being the bastion of eurozone growth to perhaps the greatest hinderance, with the industrial powerhouse continuing to suffer under the wrath of Donald Trump’s combative approach to global trade.”

The German economic ministry said improved business sentiment will boost the economy which is going through a “weak phase”.

However the ministry said risks to the economy from abroad had increased due to the coronavirus.

Mahony added: “The worrying part for eurozone growth is that the weakness seen throughout both Germany and wider region came prior to the coronavirus crisis, with any knock-on impact likely to push Germany into negative growth.”

Comparatively, GDP in the US increased by 0.5 per cent in the fourth quarter.

Read more: Germany on track for growth as confidence rises, says Ifo institute

Insurer Allianz’s economists Ludovic Subran and Katharine Utermohl said: “The risk that Germany’s ‘golden’ decade of uninterrupted economic growth … will come to an end in 2020 remains on the table for now”.

More encouragingly, the number of people in employment rose 0.3 per cent across the eurozone in the fourth quarter, and by 0.2 per cent in the European Union.

It pulls the unemployment rate on the continent down to its lowest level since the financial crisis but is not leading to faster growth.