German GDP declines 0.1% in Q2

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BERLIN
Germany’s inflation-corrected gross domestic product (GDP) declined by 0.1 percent in the second quarter of 2019, adjusted for season and calendar effects, compared with the previous quarter, the Federal Statistical Office (Destatis) announced on Tuesday. The Office thereby confirmed its initial calculations regarding German GDP decline from August 14.
In the first quarter of 2019, Germany’s inflation-corrected GDP had been 0.8 percent higher than in the same quarter of the previous year, the Destatis figures showed. However, the German statisticians noted that the development of foreign trade slowed economic growth in the second quarter of 2019. German exports fell by 0.8 percent in Q2 2019 compared to the same period the previous year, which was the strongest decline in six years, Destatis stated.
Meanwhile, Germany imported 1.8 percent more goods and services in the second quarter than a year ago.
Compared to the first quarter, German exports had declined 1.3 percent in Q2 while imports declined 0.3 percent, according to the figures. Positive impetus came from the German domestic economy as private consumer spending in Q2 was 0.1 percent higher than in the first quarter, according to Destatis.
The sharp decline in economic output in the manufacturing sector of minus 4.9 percent, which accounted for slightly more than one-fifth of German gross added value, meant that the overall real gross added value was just below the level of the previous year, noted Destatis. The German government had most recently forecast economic growth of 0.5 percent for 2019 as a whole, compared to 1.5 percent growth last year.
Chancellor Angela Merkel and Finance Minister Olaf Scholz had so far made it clear that they wanted to stick to their course of a black zero in which no new debt would be created.

Since 2014, the German federal budget had reached black zero every year, but government revenues were likely to be weaker due to the economic downturn and Scholz had already reworked the 2020 budget.
Politicians must quickly provide strong impulses for public and private investment activity, said Joachim Lang, Managing Director of the Federation of German Industries (BDI), recently. The debt brake, which is anchored in the Basic Law, is more decisive than achieving a so-called black zero. Germany now has to change its financial policy, emphasized Lang.
The debt brake meant that the German federal government could continue to borrow on a small scale at 0.35 percent of GDP. Claus Michelsen, Director for economic affairs at the German Institute for Economic Research (DIW), agreed that it was time for a fundamental change of course. To achieve this, the dogma of the ‘black zero’ must be overcome and the rules of the debt brake reformed, argued Michelsen.

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