German economic output declined in the third quarter of 2018 for the first time in three and a half years. Provisional data from the Federal Statistical Office (Destatis) indicate that real gross domestic product (GDP) fell by 0.2% on the preceding quarter (adjusted for seasonal and calendar effects). “This decline is primarily due to a drop in output in the automotive sector,” explained Bundesbank President Jens Weidmann at an event in Berlin. Nevertheless, he warned against making too much of this decline. “Fluctuations in the figures should not obscure the fact that the economic upturn in Germany and the euro area is still intact,” said Weidmann, noting that a slowdown in the pace of expansion may also reflect increased capacity utilisation and growing bottlenecks in the labour market.

Negative signals from abroad

According to Destatis, one of the reasons for the decline on the demand side of Germany’s GDP in the third quarter was the drop in exports and increase in imports. Furthermore, while investment has risen, consumer spending has fallen. GDP had gone up considerably in the first half of 2018 (by 0.4% in the first quarter and by 0.5% in the second quarter),

and year-on-year economic growth remains positive. According to figures from Destatis, price-adjusted GDP in the third quarter of 2018 was 1.1% higher than in the same period a year earlier. While this increase is somewhat smaller than in the first two quarters of 2018 (1.4% in the first quarter and 2.3% in the second),  the number of employed is still higher than the figure one year ago, with 556,000 additional persons or a 1.3% rise in employment compared to the previous year. 

Bundesbank December forecast

The Bundesbank will publish its next forecast assessing Germany’s future economic development on 14 December.