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The German economy is coming back from the brink

Nov 27 2019, 01:32 PM (+06) | ATFX

Germany's Q3 GDP came in better than expected after showing limited growth in the euro zone's largest economy by 0.1% QoQ and 0.5% YoY, showing a consolidation in the economy after GDP growth slowed in the second quarter of this year, it was essentially -0.2%. The main reason for the markets was for the index to contract for two consecutive quarters to technically enter the recession, which did not happen.

 

Perhaps most important in the GDP details to note the following two main points:

First, the labour market has improved overall

The index reveals that the total number of employees in the German labour market reached 45.4 million. This represents an increase of 356,000 employees, or 0.8%, over the previous year. Which is puts the number of workers at the highest level since 1990. It is also remarkable that overall labour productivity improved substantially from the level of the previous year. After labour productivity rose 0.2%.

The improvement in the German labour market extended to the other hand, where total wages and salaries of employees increased by 4.3% compared to the third quarter of 2018, as well as net wages and salaries increased by 4.7% on average, and given the change in wages salaries per worker, we will note that wages and salaries per employee did not rise that much, only increased by 3.2% in growth and 3.6% in net terms. This softer wages and salaries increase per employee can be explained by the rise in the total number of employments, which grew by 1.0% compared to the same quarter a year ago. While household disposable income increased by 3.4%, it is almost the same as the rate of increase in household final consumer spending at current prices 3.5%.

Second, improved consumer spending saved the German economy from recession

Looking consumer spending at the quarterly comparison, it had a positive impact on the improvement in the GDP reading. Also, the fixed capital formation in the construction sector grew significantly from the previous quarter by (+ 1.2%). Fixed capital formation on R & D expenses also rose 1.0%. The growth of foreign trade has made a positive contribution to economic growth. Exports rose 1.0% in the second quarter of 2019, which saw a sharp decline in commodity exports. While the imports in the third quarter of 2019 remained almost in the previous quarter level.

 

Information provided by ATFX (AE) Head of Market Research: Ramy Abouzaid
 
Legal: AT Global Markets (UK) Limited is authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom. FCA registration number (760555). Registered Office: 32 Cornhill, London, EC3V 3SG. Company No. 09827091

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