Germany: Economy contracts in Q3 – ABN AMRO

Han de Jong, Chief Economist of ABN AMRO, points out that the German GDP contracted by 0.2% qoq in Q3 and was slightly worse than expected and the first negative growth number since early 2015.

Key Quotes

“But things aren’t as bad as the number suggests. Admitted, growth has slowed this year, but the main problem in Q3 was the car industry. The new emission testing procedures that started in September appear to have caused a significant drop in production.”

“One has to be careful with all these numbers, they are volatile and not seasonally adjusted. But it is safe to assume that German car manufacturers will get their act together and that a bounce in production and therefore in the growth of overall German industrial output and GDP growth is likely to occur in the months ahead.”

“The ZEW index for Germany, which measures economic confidence among analysts, weakened in November. Confidence has fallen all year, albeit from exceptionally high levels.”

“The subseries reflecting the confidence level in the current situation in Germany appeared to stabilise in August-October, but fell sharply in November. I suspect that this is at least partly due to the problems in the car sector becoming obvious and the turbulence on equity markets. My best guess is that the sharp drop in November is temporary. Also note that the index is still much higher than late 2014 when the economy weakened significantly.”