On 14 November 2019 Destatis estimated that German GDP grew 0.1% in the third quarter after falling 0.2% in the second. What it means for Spanish exports and the car industry.
On 14 November 2019, Germany’s Federal Statistical Office, Destatis, published its first estimate of third-quarter gross domestic product (GDP): growth of 0.1% on the second quarter, adjusted for price, seasonal and calendar effects. The figure is small, but it keeps the euro area’s largest economy out of a technical recession, usually defined as two consecutive quarters of falling GDP.
What the data say
With the new figures, GDP fell 0.2% in the second quarter, one-tenth more than first published, and growth in the first quarter was revised up to 0.5%. Compared with the same quarter of 2018, GDP rose 1.0%; adjusted for the calendar effect, 0.5%, because the third quarter of 2019 had one more working day.
Destatis attributes the increase mainly to consumption: household and government spending both grew. Exports rose, imports stayed roughly at the previous level and construction investment increased, while investment in machinery and equipment was lower than in the previous quarter. The breakdown is provisional, and Destatis will publish more detailed results on 22 November. Employment reached 45.4 million people, 356,000 more than a year earlier.
What it means for Spain
Germany is Spain’s main customer after France: according to the World Bank, it received US$36,265 million of Spanish goods exports in 2018, 10.5% of the total. Among the products Spain exports most to the world are passenger cars and their parts and accessories, so the car industry is one of the sectors most exposed to the course of European industry.
The Ministry of Industry, Trade and Tourism noted in its report of 22 October that Spanish exports grew 1.1% between January and August 2019, to a record €192,131 million, but fell 6.2% in August, a month in which the car sector subtracted 1.3 points. The Secretary of State for Trade, Xiana Méndez, considered those data positive taking into account, among other factors, the loss of dynamism in the main destination markets, especially Germany and the United Kingdom. According to the same report, sales to the European Union account for 65.7% of Spanish goods exports between January and August 2019, so the performance of the large European economies weighs heavily on exporting companies’ accounts.
What to watch
A 0.1% is very weak growth: it avoids a negative reading but does not confirm a recovery. It is worth remembering that the figure is a first estimate subject to revision, as the second-quarter figure has been. For a company that exports or supplies to German industry, what matters is following its order book and its customers’ payment terms, and assessing whether it depends too much on a single one.
And for anyone with business or investments tied to Germany, the lesson is not to read a single figure: consumption is holding the economy up, while investment in machinery has fallen. This note is informational and neither recommends nor discourages any investment. Ask your adviser how it applies to your case.
Avoiding a technical recession is not the same as regaining momentum.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
