Germany: GDP growth confounds market expectations and picks up in Q3
According to a preliminary estimate, GDP growth accelerated to 0.3% on a seasonally adjusted quarter-on-quarter basis in the third quarter, from 0.1% in the second quarter. The print exceeded market expectations and means that GDP is now 0.2% above its pre-pandemic level.
On an annual basis, economic growth moderated to 1.1% in Q3, from the previous period’s 1.7% growth. Q3’s reading marked the slowest growth since Q1 2021.
A full breakdown will not be not available until 25 November. The only detail the statistical office gave in the press release was that private consumption had been the primary driver of growth in Q3.
Shifting to the current quarter, all but one of 28 panelists polled by FocusEconomics expect GDP to contract in Q4. The slowdown should be broad-based, with private consumption hit by elevated inflation—Octobers print was the highest since reunification in 1990—and exports dragged on by a slowing global economy.
Commenting on the outlook, analysts at Fitch Solutions said:
“We remain of the view that Germany is set to enter recession in the winter. Purchasing managers index (PMI) figures for October 2022 signal further declines in activity across both services and manufacturing, with the composite figure at its lowest since the beginning of the pandemic. Meanwhile, the Ifo Business Climate Index showed further deteriorations in sentiment in October, having weakened significantly amid the war in Ukraine.”