Germany: Consumption is the new export – ING

According to Carsten Brzeski, Chief Economist at ING Germany, consumption and construction saved the German economy from a technical recession in the third quarter.

Key Quotes:

“The second estimate of 3Q GDP growth confirmed that the German economy had indeed avoided a technical recession at the last minute. Particularly the strength of private consumption remains an important anti-recession insurance for the entire economy. In fact, private consumption has been growing consecutively every quarter since the start of 2014.”
 
“One main reason why the economy has avoided recession is a long list of election gifts, often criticized as not increasing the long-term growth potential of the German economy. Over the last two years the government has agreed increases in child allowances, pensions and study allowances as well as some tax relief and more money for health care, elderly care and schools. For 2019, all of this has amounted to a fiscal stimulus of some 0.5% of GDP. So much for the urban legend that the German government is allergic to the idea of short-term fiscal stimulus.”
 
“In the short run, however, the economy will continue to flirt with stagnation or even recession. After ten years of almost unstoppable growth, this is not necessarily the end of the world. However, some time ago a growth model mainly driven by consumption and construction would have received quite some criticism. Particularly from one country: Germany. Do we need more evidence that times can change?”