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German economy stagnates as eurozone growth hits seven-year low - business live German economy stagnates as eurozone growth hits seven-year low - business live
(32 minutes later)
Rolling coverage of the latest economic and financial news, including the latest eurozone growth figuresRolling coverage of the latest economic and financial news, including the latest eurozone growth figures
The eurozone will probably struggle to grow in the current quarter, reckons Greg Daco of Oxford Economics.
He predicts that the mere 0.1% growth reported in October-December will be repeated in January-March, with coronavirus restrictions hurting the economy.
If you’re just tuning in, here’s the AFP newswire’s take on today’s German growth figures:
Hopes pale for German growth rebound after late 2019 flatline
Fancy some afternoon reading? Here’s a fascinating thread from Sky News’s Ed Conway about UK statistics, and how a mysterious gold transaction flattered Britain’s trade data:
The US stock market has opened gently, with the Dow Jones industrial average up 33 points or 0.1% at 29,456.The US stock market has opened gently, with the Dow Jones industrial average up 33 points or 0.1% at 29,456.
That’s despite a 0.1% drop in US factory output last month, as Boeing’s 737 Max crisis hits.That’s despite a 0.1% drop in US factory output last month, as Boeing’s 737 Max crisis hits.
With stock markets at record highs, Universal Music wants to join the party with an IPO:With stock markets at record highs, Universal Music wants to join the party with an IPO:
Here’s our story about Tesco illegally blocking its rivals from opening stores:Here’s our story about Tesco illegally blocking its rivals from opening stores:
Wall Street is expected to post fresh gains today, despite the uncertainty created by Covid-19.Wall Street is expected to post fresh gains today, despite the uncertainty created by Covid-19.
Mihir Kapadia, the CEO of Sun Global Investments, says:Mihir Kapadia, the CEO of Sun Global Investments, says:
For days, investors have been fluctuating between panicking about the coronavirus, and persuading themselves that the crisis is abating.For days, investors have been fluctuating between panicking about the coronavirus, and persuading themselves that the crisis is abating.
Today they’re in a calm mood, pushing stocks in Europe up to new record highs.Today they’re in a calm mood, pushing stocks in Europe up to new record highs.
The Stoxx 600 index has gained 0.15% to a fresh peak, after China reported that some deaths have been ‘double-counted’. This has reassured traders, who hit the sell button yesterday after a big spike in cases.The Stoxx 600 index has gained 0.15% to a fresh peak, after China reported that some deaths have been ‘double-counted’. This has reassured traders, who hit the sell button yesterday after a big spike in cases.
But new cases keep cropping up around the world, including a Channel 4 employee in London:But new cases keep cropping up around the world, including a Channel 4 employee in London:
Back in the UK, supermarket chain Tesco has been blasted by regulators for unlawfully blocking its rivals from opening stores.Back in the UK, supermarket chain Tesco has been blasted by regulators for unlawfully blocking its rivals from opening stores.
The Competition and Markets Authority has announced that Tesco has pledged to stop using covenants and exclusivity arrangements to prevent landlords letting sites to other supermarkets.The Competition and Markets Authority has announced that Tesco has pledged to stop using covenants and exclusivity arrangements to prevent landlords letting sites to other supermarkets.
A review has found 23 separate agreement of this type, which has been illegal since 2010.A review has found 23 separate agreement of this type, which has been illegal since 2010.
Andrea Gomes da Silva, Executive Director, Markets and Mergers at the CMA, says:Andrea Gomes da Silva, Executive Director, Markets and Mergers at the CMA, says:
The CMA is also asking other supermarkets to check whether they have used similar anti-competitive restrictions.The CMA is also asking other supermarkets to check whether they have used similar anti-competitive restrictions.
Back in the debt crisis, some of Europe’s smaller countries were the black sheep of the euro-flock. Today, these peripheral nations are driving growth, as France and Italy shrink and Germany stagnates.Back in the debt crisis, some of Europe’s smaller countries were the black sheep of the euro-flock. Today, these peripheral nations are driving growth, as France and Italy shrink and Germany stagnates.
Barret Kupelian, senior economist at PwC, says the periphery are the euro area’s bright spot:Barret Kupelian, senior economist at PwC, says the periphery are the euro area’s bright spot:
Germany’s economy is unlikely to improve much this year, due to trade tensions, the shift away from petrol and diesel cars, and Brexit.Germany’s economy is unlikely to improve much this year, due to trade tensions, the shift away from petrol and diesel cars, and Brexit.
So argues Ludovic Subran and Katharina Utermöhl, top economists at German insurance giant Allianz. They warn in a new report that Europe’s largest member risks a “stranded future”, unless it can strengthen its economy and become more competitive.So argues Ludovic Subran and Katharina Utermöhl, top economists at German insurance giant Allianz. They warn in a new report that Europe’s largest member risks a “stranded future”, unless it can strengthen its economy and become more competitive.
Here’s the key points, kicking off on today’s growth figures.Here’s the key points, kicking off on today’s growth figures.
Recession avoided in 2019, but no rebound on the cards for 2020. At +0.6%, about half the rate for the Eurozone as a whole, German GDP grew at the slowest pace since the region’s sovereign debt crisis. We do not expect 2020 to bring much relief with GDP growth likely to slow marginally to a seasonally-adjusted +0.5%. Moreover the risk that Germany’s “golden” decade of uninterrupted economic growth – the longest period of expansion since reunification – will come to an end in 2020 remains on the table for now, given the cautious outlook for global trade and the automotive industry as well as lingering elevated political uncertainty over trade and Brexit.Recession avoided in 2019, but no rebound on the cards for 2020. At +0.6%, about half the rate for the Eurozone as a whole, German GDP grew at the slowest pace since the region’s sovereign debt crisis. We do not expect 2020 to bring much relief with GDP growth likely to slow marginally to a seasonally-adjusted +0.5%. Moreover the risk that Germany’s “golden” decade of uninterrupted economic growth – the longest period of expansion since reunification – will come to an end in 2020 remains on the table for now, given the cautious outlook for global trade and the automotive industry as well as lingering elevated political uncertainty over trade and Brexit.
The subdued outlook for the German economy provides a glimpse of a “stranded” future. Europe’s economic powerhouse is struggling to keep up with structural change, putting it at risk of becoming a “stranded economy” with its long-standing competitive advantage in industry and in particular the car sector becoming obsolete. While the German economy remains highly innovative, it is increasingly struggling to leverage its potential, given the lack of even a basic digital infrastructure, a growing digital skills gap and inadequate start-up funding.The subdued outlook for the German economy provides a glimpse of a “stranded” future. Europe’s economic powerhouse is struggling to keep up with structural change, putting it at risk of becoming a “stranded economy” with its long-standing competitive advantage in industry and in particular the car sector becoming obsolete. While the German economy remains highly innovative, it is increasingly struggling to leverage its potential, given the lack of even a basic digital infrastructure, a growing digital skills gap and inadequate start-up funding.
But a “lost” decade for Germany is not a done deal, yet. What is needed is a significant long-term investment plan focused on upgrading infrastructure, updating the education system, boosting research & development capabilities and creating a venture fund to co-invest in promising start-ups. But solely throwing money at the problem is not the solution. Instead the German economy’s digital catch-up initiative needs to be accompanied by a “simplification shock“ i.e. a notable reduction in red tape to allow for a better delivery of large-scale infrastructure projects, as well as to make life easier for corporates, particularly SMEs.But a “lost” decade for Germany is not a done deal, yet. What is needed is a significant long-term investment plan focused on upgrading infrastructure, updating the education system, boosting research & development capabilities and creating a venture fund to co-invest in promising start-ups. But solely throwing money at the problem is not the solution. Instead the German economy’s digital catch-up initiative needs to be accompanied by a “simplification shock“ i.e. a notable reduction in red tape to allow for a better delivery of large-scale infrastructure projects, as well as to make life easier for corporates, particularly SMEs.
More here.More here.
Andrew Kenningham of Capital Economics has told clients:Andrew Kenningham of Capital Economics has told clients:
It’s hard to put too much gloss on a stagnating economy, but the German government has tried to strike an optimistic-ish tone this morning.It’s hard to put too much gloss on a stagnating economy, but the German government has tried to strike an optimistic-ish tone this morning.
Berlin’s economy ministry says Germany’s economy is going through a weak phase, but it’s encouraged that business sentiment has improved.Berlin’s economy ministry says Germany’s economy is going through a weak phase, but it’s encouraged that business sentiment has improved.
But... the ministry also warns that the coronavirus outbreak means that the risks from overseas have increased, but it’s hard to say what the impact will be.But... the ministry also warns that the coronavirus outbreak means that the risks from overseas have increased, but it’s hard to say what the impact will be.
More encouragingly, employment growth across the eurozone has risen.More encouragingly, employment growth across the eurozone has risen.
The number of employed people rose by 0.3% in the euro area in the final quarter of 2019, and by 0.2% in the European Union. That’s up from 0.1% in Q3.The number of employed people rose by 0.3% in the euro area in the final quarter of 2019, and by 0.2% in the European Union. That’s up from 0.1% in Q3.
This jobs creation has pulled the unemployment rate down to its lowest level since the financial crisis, which is clearly welcome -- but it’s disappointing that it’s not leading to faster growth.This jobs creation has pulled the unemployment rate down to its lowest level since the financial crisis, which is clearly welcome -- but it’s disappointing that it’s not leading to faster growth.