Growth ground to a halt at the end of the year in
Germany, Europe’s largest economy, as manufacturing remained in a slump and
exports fell, official figures showed Friday.
The flat reading underlines the challenge facing the
broader eurozone economy as it struggles against headwinds from the U.S-China
trade dispute and Britain’s departure from the European Union.
Both the German and eurozone figures were the
weakest since 2013, when the region was suffering from a debt crisis that
nearly spelled the end of the euro currency.
Germany’s state statistics agency said Friday there
was zero growth in the fourth quarter and a mediocre 0.6% increase for the
whole year. The figures did not change the disappointing reading for the entire
eurozone of 0.1% growth during the fourth quarter.
Germany’s troubles are a central problem for the
19-country eurozone economy and the European Central Bank, which is trying to
stimulate flagging growth and inflation with negative interest rates and bond
purchases with newly printed money.
Germany has been a manufacturing and export champion
in recent years but those areas have been sluggish. Consumer spending and
services businesses have held up better and kept the country out of recession.
Slowing global trade and the uncertainty caused by
the U.S.-China conflict over trade have been one headwind, as businesses wonder
if new tariffs, or import taxes, will disrupt their supply chains of raw
materials and parts. Another is structural change in industry, particularly the
auto business, where companies must sink billions into developing electric cars
and new services based on smartphone apps, both to meet regulatory pressure for
lower greenhouse gas emissions and to head off competition from new entrants
from the tech industry.
Germany and the eurozone also face the possibility
of disrupted trade with Britain, which left the EU on Jan. 31. Negotiators must
work out a trade deal by the end of the year to avoid new tariffs and barriers
to products, and time is short to reach agreement on the complex issues
involved.
And on top of all that come worries about the spread
of the coronavirus which causes the COVID-19 illness.
“The effect of coronavirus on global supply chains
is likely to keep eurozone and German growth subdued in the short term,” said
Rosie Colthorpe, European economist at Oxford Economics.
The three biggest economies in Europe all stagnated
or shrank in the last three months of the year — number 2 France saw output
contract, albeit by a modest 0.1% while heavily indebted Italy shrank 0.3%.
Carsten Brzeski, chief economist at ING Germany,
said recent hopes for a modest upswing were looking a little premature at this
point.
“In general, the German economy remains stuck
between solid private consumption and a paralyzed manufacturing sector,” he
said in a note.