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| German economy slows as weak trade bites - business live | German economy slows as weak trade bites - business live |
| (35 minutes later) | |
| Shares in some of Germany’s biggest companies have dipped in early trading. | |
| The DAX index has dropped by 0.3%, or 38 points, to 12,939 in Frankfurt, following this morning’s disappointing growth figures. | |
| Pharmaceutical giant Merck is the biggest faller (-2.8%), followed by industrial conglomerate Thyssenkrupp (-2.4%, despite reporting higher profits this morning). | |
| At just 0.3%, this is Germany’s weakest quarterly growth since the third quarter of 2016. | |
| ING economist Carsten Brzeski says Germany had a ‘stumbling start’ into 2018, for a variety of reasons: | |
| Trade and government consumption were a drag on growth. Also, don’t forget that a couple of one-off factors like the cold winter weather, early Easter vacation and strikes probably distorted first quarter data. | |
| Brzeski says we shouldn’t panic - he thinks that Germany’s economy still has underlying strength, including its manufacturing base: | |
| Despite some minor leveling off, capacity utilisation is still close to record highs, assured production in the industry is close to all-time highs and the high stock of orders and historically low inventories all bode extremely well for industrial production in the coming months. | |
| So this growth slowdown is “no more than a black eye”, Brzeski concludes. | |
| The news that Germany’s growth rate halved in the last quarter is causing a stir. | |
| Economist Ulrik Bie blames the drop in exports by German firms: | |
| German GDP grew by 0.3% q/q in 1Q/2018 with the annual growth rate declining to 2.3%. This was weaker than expected. Positive growth impulse from investments - construction and machinery, with a small increase in household consumption. Negative contribution from net export pic.twitter.com/VDiD6q70Ll | |
| Tom Barfield of the AFP newswire says it will raise fears about the health of the European economy: | |
| Fears of a #eurozone slowdown will be back today as German #GDP growth braked to 0.3 percent in the first quarter, halving the 0.6 percent that rounded off last year - @destatis figures via @afp | |
| Pantheon Macroeconomics’ Claus Vistesen believes the eurozone will tick along at a more steady rate this year: | |
| Slightly downside surprise in German GDP. Everything, imho, suggests that y/y growth in the EZ as a whole is slowing towards just under 2%; consistent with q/q growth of 0.4-to-0.5% for the rest of the year. | |
| Oliver Rakau of Oxford Economics warns that Germany has lost momentum, and may struggle to bounce back in the coming months. | |
| The German economy lost a lot of momentum in Q1. GDP grew by 0.3%, in line with our view but only half the 0.6% from Q4 2017. Part of the weakness will be reversed as transitory factors fade, but we think there is more to it. Q2 will see only a bounce to 0.6% and 2018 record 2.2% | |
| Newsflash: Germany has suffered a growth slowdown after being hit by weak trade. | Newsflash: Germany has suffered a growth slowdown after being hit by weak trade. |
| The eurozone’s largest economy expanded by just 0.3% in the first three months of this year, official figures show. | The eurozone’s largest economy expanded by just 0.3% in the first three months of this year, official figures show. |
| That’s a sharp slowdown compared to Germany’s 0.6% in the final quarter of 2017. It is also below the 0.4% which economists had expected. | That’s a sharp slowdown compared to Germany’s 0.6% in the final quarter of 2017. It is also below the 0.4% which economists had expected. |
| The Federal Statistics Office says: | The Federal Statistics Office says: |
| The German economy continued to grow at the beginning of the year, though at a slower pace. | The German economy continued to grow at the beginning of the year, though at a slower pace. |
| The slowdown was triggered by “less dynamic” foreign trade, as “both exports and imports decreased compared with the previous quarter”. | The slowdown was triggered by “less dynamic” foreign trade, as “both exports and imports decreased compared with the previous quarter”. |
| Government spending also fell, for the firs time in five years, dragging growth back. | Government spending also fell, for the firs time in five years, dragging growth back. |
| But capital investment did rise during the quarter, suggesting companies are still investing in equipment and factories. Domestic consumption also made a positive contribution. | |
| #GrossDomesticProduct up 0.3% in the 1st quarter of 2018 https://t.co/PpLlRWE0Pj #GDP pic.twitter.com/tWFPL8kifp | #GrossDomesticProduct up 0.3% in the 1st quarter of 2018 https://t.co/PpLlRWE0Pj #GDP pic.twitter.com/tWFPL8kifp |
| Although Germany is obviously still growing, these figures do indicate that the eurozone economy has lost some steam in recent months. | Although Germany is obviously still growing, these figures do indicate that the eurozone economy has lost some steam in recent months. |
| They also suggests that fears of a trade war, triggered by Donald Trump’s tariffs on steel and aluminium, are causing worrying ripples in the global economy. | They also suggests that fears of a trade war, triggered by Donald Trump’s tariffs on steel and aluminium, are causing worrying ripples in the global economy. |
| Reaction to follow.... | Reaction to follow.... |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Today we get a new healthcheck on Europe’s economy, with a fresh estimate of eurozone GDP for the first three months of this year, plus growth figures from Germany, Italy and the Netherlands. | Today we get a new healthcheck on Europe’s economy, with a fresh estimate of eurozone GDP for the first three months of this year, plus growth figures from Germany, Italy and the Netherlands. |
| Last month’s ‘flash’ data showed the eurozone economy grew by 0.4% - investors will be concerned if this is revised downwards today. | Last month’s ‘flash’ data showed the eurozone economy grew by 0.4% - investors will be concerned if this is revised downwards today. |
| Britain’s labour market is also in focus. The latest unemployment figures are expected to show the jobless rate remains at just 4.2%, its lowest level in over 40 years. | Britain’s labour market is also in focus. The latest unemployment figures are expected to show the jobless rate remains at just 4.2%, its lowest level in over 40 years. |
| But will there be any progress on wages? Economists predict that basic pay growth rose to 2.9% in the first three months of this year - up from 2.8%. | But will there be any progress on wages? Economists predict that basic pay growth rose to 2.9% in the first three months of this year - up from 2.8%. |
| A strong reading might give the pound a lift, and reignite speculation that interest rates might rise in August. | A strong reading might give the pound a lift, and reignite speculation that interest rates might rise in August. |
| Jasper Lawler of London Capital Group says: | Jasper Lawler of London Capital Group says: |
| Given that inflation in March was 2.5%, wages growth of 2.9% or higher would be an encouraging sign that domestic inflation will slowly start to pick up, potentially reviving the possibility of a Bank of England rate rise later in the year and pushing sterling back towards $1.37. | Given that inflation in March was 2.5%, wages growth of 2.9% or higher would be an encouraging sign that domestic inflation will slowly start to pick up, potentially reviving the possibility of a Bank of England rate rise later in the year and pushing sterling back towards $1.37. |
| Traders will also be tracking events in Italy, where talks to form a new government are still continuing. | Traders will also be tracking events in Italy, where talks to form a new government are still continuing. |
| The agenda: | The agenda: |
| 7am BST: First estimate of German GDP in Q1 2018 | 7am BST: First estimate of German GDP in Q1 2018 |
| 8.30am BST: First estimate of Netherlands GDP in Q1 2018 | 8.30am BST: First estimate of Netherlands GDP in Q1 2018 |
| 9am BST: First estimate of Italian GDP in Q1 2018 | |
| 9.30am BST: UK unemployment and wage growth figures for January-March 2018 | 9.30am BST: UK unemployment and wage growth figures for January-March 2018 |
| 10am BST: Updated estimate of eurozone GDP in Q1 2018 | 10am BST: Updated estimate of eurozone GDP in Q1 2018 |
| 10am BST: ZEW survey | 10am BST: ZEW survey |