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German Economy Returned To Growth, But The Government Said The Outlook Remain Clouded By Trade Disputes

German Economy

The German economy resumed growth in the first quarter, as consumers spent freely and construction activities picked up.

Introductory data released on Wednesday by the Statistics Office, showed that the growth in the economy was mainly driven by higher household spending and a booming construction industry. Also, corporate investments in machinery and equipment also helped while state spending was slightly negative.

The Federal Statistics office stated that the gross domestic product (GDP) in the Europe’s largest economy grew by 0.4% quarter-on-quarter, compared with the 0.7% recorded in the same quarter of the previous year. The statistics office disclosed that this calendar-adjusted data was in line with analysts’ forecast.

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Reuters reported that the Economy Minister, Peter Altmaier, stated that the growth statistics were a “first ray of hope” succeeding two quarters without expansion, but was too early to give the all-clear.

Us-China Trade War Uneven Impact On The German Economy.

In the statements by the Minister, “The international trade disputes are still unresolved. We must do everything possible to find acceptable solutions that enable free trade.” The ministry confirmed that with the global trade tensions on industrial activities last year, the German economy contracted by 0.2% in the third quarter of last year and stagnated in the fourth.

Meanwhile, the US and China have ramped up their trade war and both nations are important markets for German exporters, this means the tariffs are also hurting their businesses. Trump may also, increase tariffs also this week on European car imports, which would have an uneven impact on Germany.

How Has The German Economy Fared So Far?

The recovery in Europe’s largest economy which narrowly escaped recession in late 2018 helped drive a speeding up in the euro zone. It also takes off some burden from the European Central Bank (ECB) to offer fresh monetary measures to oppose the effects of slowing global growth. Analysts said.

The euro zone, which expanded by 0.2% in the last three months of 2018, doubled that growth rate to 0.4% in the first quarter, the EU’s statistics office confirmed on Wednesday.

The Economy Ministry revealed in a report that German exporters are also fighting with weaker foreign demand and doubts triggered by Britain’s chaotic departure from the European Union.

Calls By Germany To Encourage Companies As A Factor For Growth.

The government cut down its 2019 growth forecast to 0.5% last month. That would mark a quick slowdown from growths of 2.2% in 2017 and 1.4% in 2018.

Altmaier, who is a confidant of conservative Chancellor Angela Merkel, repeated a call to encourage businesses by cutting red tape and taxes but Finance Minister Olaf Scholz, has refused to cut corporate taxes. He points to tight budget.

DekaBank analyst, Andreas Scheuerle, said “In normal times, today’s growth figures would be reason enough to revise up GDP projections. But in light of the massive threats for world trade, economists are likely to keep their powder dry.”

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