Despite rising interest rates weighing on private consumption, Germany’s economy shrank less than expected in the third quarter, underpinned by investment, preliminary estimates from Destatis showed Monday.
Gross domestic product fell 0.1 percent sequentially, offsetting an upwardly revised 0.1 percent rise a quarter ago. The pace of contraction was slower than the expected 0.3 percent decline.
The statistical office revised the second quarter GDP from nil growth and the first quarter figure from a 0.1 percent drop.
Although the breakdown of GDP is unavailable, the statistical office said household spending was lower. By contrast, positive contributions came from gross fixed capital formation in machinery and equipment.
GDP, on a calendar adjusted basis, contracted 0.3 percent annually after staying flat in the second quarter. This was also better than the 0.7 percent expected fall.
The annual decrease in price-adjusted GDP doubled to 0.8 percent from 0.4 percent.
The slight decline in GDP in the third quarter and upward revision to the previous two quarters suggest that the economy is not doing quite as poorly as anticipated, Capital Economics’ economist Andrew Kenningham said. Given that the business surveys deteriorated over the course of the third quarter and are consistent with GDP falling in October, and that interest-rate sensitive sectors are clearly struggling, it seems likely that GDP will shrink again in the fourth quarter, the economist added.
ING economist Carsten Brzeski said, “The German economy looks set to remain in the twilight zone between minor contraction and stagnation not only this year but also next year.”
The International Monetary Fund projected Germany to shrink 0.5 percent this year owing to the weakness in interest-rate-sensitive sectors and slower trading-partner demand.
In the monthly report, released this month, Bundesbank said the largest euro area probably shrunk somewhat in the third quarter due to weak foreign demand for industrial products.