In the Bundesbank’s estimation, the German economy is likely to have stagnated in the final quarter of 2019. The two-speed development of the economy continued, according to the latest Monthly Report. The domestic economy continued to provide impetus, with the fairly favourable labour market and income prospects maintaining households’ strong appetite for consumption despite the weak overall economic development. Enterprises in the retail trade sector regarded their business situation as exceedingly good at the end of the year, according to the Ifo Institute. The report states that the domestic construction sector also benefitted from households' positive income prospects and the very favourable financing conditions. “There are still no signs of the construction boom coming to an end,” write the Bundesbank’s experts.

Indications of stabilisation in manufacturing

By contrast, the report states that the downturn in export-oriented industry has persisted. “However, evidence has been growing recently that manufacturing could stabilise at the beginning of 2020,” the economists note. The order situation in the industrial sector has not shown any further deterioration for several months, and exports of goods have risen perceptibly. Short-term export expectations have likewise recovered, entering positive territory for the first time in six months.

Steep rise in industrial output

According to the report, German industrial output showed a steep rise in November 2019, up by 1% on the October level in seasonally adjusted terms. However, on an average for October and November, industrial output was significantly lower than the average for the third quarter (–1½%). The two largest sectors of German industry, the automotive industry, which has been performing weakly for quite some time now, and mechanical engineering accounted for a large portion of the decline. By contrast, other transport equipment provided some impetus.

Growth slackens pace

According to the provisional figures of the Federal Statistical Office, real gross domestic product grew by 0.6% in 2019 as a whole compared with the previous year. Total output thus rose at a considerably slower pace than in the previous year, when it had been up by a significant 1.5%. A strong decline in gross value added in the manufacturing industry was the main cause for this slowdown. According to the Bundesbank’s experts, positive stimuli for the German economy came both from the boom in the construction sector and from the services sector.