Germany: Activity slowing faster than anticipated – BNP Paribas

Analysts at BNP Paribas explain that Germany’s latest GDP release for Q3 at -0.2% q/q was much weaker than generally predicted with the year-on-year growth rate declining to 1.1%.

Key Quotes

“A specific reason was the temporary problem in the German car industry in adapting to the stricter European rules concerning CO2 emissions.”

“A more structural problem for the manufacturing sector is weakening global demand, particular from China related to domestic problems and to the trade conflict with the US. It is also affecting the IFO business climate index that declined in October more than expected.”

“Nevertheless, it is holding up quite well thanks to the good performance of construction and services. The composite PMI for manufacturing and services actually surprised on the upside in October, as it declined less than expected (to 53.4 against 52.7 expected by the Bloomberg panel).”

“Largely supported by domestic demand, German activity is expected to rebound in Q4, before slowing down to its potential growth rate, estimated at 1.5%.”