Euro zone GDP slows as expected in fourth quarter

A flag of Germany waves next to the dome of the Reichstag building where the German federal parliament Bundestag meets in Berlin Germany Wednesday Feb. 12 2020

A flag of Germany waves next to the dome of the Reichstag building where the German federal parliament Bundestag meets in Berlin Germany Wednesday Feb. 12 2020

The German economy stagnated in the fourth quarter as both private consumption and state spending lost momentum, preliminary data showed on Friday, renewing fears of a recession.

Euro zone economic growth slowed as expected in the last three months of 2019 as gross domestic product shrank in France and Italy compared to the previous quarter. In July-September the growth was 0.3% and 1.4%, respectively.

Both the German and eurozone figures were the weakest since 2013, when the region was suffering from a debt crisis that almost spelled the end of the euro currency.

Joshua Mahony, senior market analyst at online trading firm IG, said: "The German economy has gone from being the bastion of eurozone growth to perhaps the greatest hinderance, with the industrial powerhouse continuing to suffer under the wrath of Donald Trump's combative approach to global trade".

She said: "Manufacturing spillovers loom large in the near term, but will rebound once growth resumes".

GDP grew 0.4% on year in the fourth quarter on a calendar and price-adjusted basis, Destatis said, in line with a Wall Street Journal poll of economists. The growth rate in annual terms has decreased from 1.4% to 0.8%. Germany has been a manufacturing and export champion in recent years but those areas have been sluggish while consumer spending and services businesses have held up better and kept the country out of recession.

Another factor causing the stagnation is connected to structural shift in the business, especially the automobile business: companies should invest billions to creating electric automobiles and new solutions based on smartphone programs, both to fulfill regulatory pressure for reduced greenhouse gas emissions and also to go off competition from new entrants from the tech sector.

And on top of all that come worries about the spread of the COVID-2019 coronavirus outbreak.

"The impact of coronavirus on worldwide supply chains is very likely to maintain eurozone and German expansion subdued in the brief term", said Rosie Colthorpe, European economist at Oxford Economics.

Carsten Brzeski, chief economist at ING Germany, stated recent expects to get a small upswing was looking somewhat premature now.

The news about the German economy for the fourth quarter was bad.

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