Germany's export driven economy -- the engine of European growth -- will be in for a spell of lackluster growth this year as the global economic downturn deepens and the trade war with China ignited by U.S. president Donald Trump remains unresolved. A recession in Germany this year seems likelier than ever.
Germany avoided entering a technical recession in the fourth quarter of 2018 by the narrowest of margins. Some German economists argue Germany would have entered a recession if 2018 didn't have one extra working day compared to the same quarter in 2017.
The German economy somewhat expanded by a mere 1.5 percent last year, its weakest annual rate in five years. Forecasts expect growth to shrink further to 1 percent this year.
As for Q4, data from the Federal Statistics Office shows the German economy stalled in Q4, missing market expectations of a 0.1 percent growth. This performance was also lower than the 0.2 percent expansion achieved by the Euro Zone as a whole.
Germany's weak Q4 comes after a 0.2 percent contraction in the July-September quarter, which was the first time GDP shrank since 2015.
Germany's GDP growth rate averaged 0.51 percent from 1970 to 2018. It hit an all time high of 4 percent in the second quarter of 1970 while plumbing a record low of -4.50 percent in the Q1 2009.
Germany's economy is the largest in Europe, the world's fourth-largest economy and is also Europe's manufacturing engine. Any weakness in Germany's economy is, therefore, troubling to its neighbors and the world in general.
Economists pointed out that most of Germany's traditionally export-focused large companies are being hammered hard by the cooling global economy and trade disputes triggered by Trump. They also face an even bigger hit if the United Kingdom's "Brexit" from the European Union on March 29 is a disorderly one, which it will likely be.
The Federal Ministry for Economic Affairs and Energy said data suggests the country's exports will be subdued in the coming months. An ongoing construction boom, however, is likely to continue. Private consumption will remain strong.
"Solid domestic drivers and fiscal stimulus are providing some support at the beginning of the year," said the ministry.
Bank of America Merrill Lynch (BofAML) says Germany's economic weakness is widespread. It cited the 1.7% drop in manufacturing output quarter-on-quarter. This deceleration is already too much for the rest of the economy to compensate for, said BofAML.