According to the Bundesbank’s current Monthly Report, economic activity in Germany continued to cool towards the end of 2018: “The Federal Statistical Office’s flash estimate shows that, after seasonal and calendar adjustment, real gross domestic product (GDP) in the final quarter of 2018 remained at the same level as in the previous quarter, in which there had been a 0.2% decline due chiefly to a one-off effect in the automotive sector.”

Weak industry

The Bundesbank’s experts note that the economy’s failure to gain additional momentum following the setback in the third quarter was mainly due to persistently weak industrial activity. For example, overcoming production stoppages in the automotive sector in connection with the new EU-wide procedure for testing emissions, the Worldwide harmonised Light vehicles Test Procedure (WLTP), took considerably longer than initially expected. In addition, output in other industrial sectors was scaled back. The report states that the construction sector, too, which is operating close to full capacity, is unlikely to have generated any additional stimuli. By contrast, the services sector is likely to have bolstered output levels in the final quarter of last year.

Labour market defies weaker economic activity

According to the Monthly Report, German exports showed a marked rise in real terms in the final quarter of 2018. However, this only meant that they largely made good their decline in the third quarter, which was, in turn, predominantly driven by the extensive output losses in the automotive sector. By contrast, German imports of goods in the final quarter of 2018 are likely to have remained unchanged on the quarter in real terms, although it should be taken into account that there was a steep rise in imports during the summer months, write the Bundesbank’s experts.

The Monthly Report points out that the labour market continued to be in very good shape towards the end of 2018 despite the slower pace of economic activity. In the final quarter of 2018, seasonally adjusted employment in Germany went up by 110,000 persons, or 0.2%. This increase was driven solely by the expansion of employment subject to social security contributions.