Published: Sun, February 16, 2020
Markets | By Otis Pena

Euro zone GDP slows as expected in Q4, but employment beats consensus

Euro zone GDP slows as expected in Q4, but employment beats consensus

No matter what the argument, Germany and China are massive trade partners.

The European Union's statistics office Eurostat said GDP in the 19 countries sharing the euro expanded 0.1% quarter-on-quarter in the October-December period, as announced on Jan 31, for a 0.9% year-on-year gain - a downward revision from the previously estimated 1.0% growth.

While forecasts point towards a steady monthly reading of 0.1% markets are wary of the potential for a downside disappointment.

Over the whole year, the annual growth rate of 0.6 percent was Germany's worst since 2013. Germany has been a manufacturing and export champion in recent years but those areas have been sluggish while consumer spending and services businesses have held up better and kept the country out of recession. -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 factor causing the stagnation is connected to structural shift in the business, especially the automobile business: companies should invest billions to creating electric automobiles and new solutions based on smartphone programs, both to fulfill regulatory pressure for reduced greenhouse gas emissions and also to go off competition from new entrants from the tech sector.

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And in addition to all that include worries about the spread of this COVID-2019 coronavirus outbreak.

Lingering fears over the potential for a fourth quarter German economic contraction helped to push the Euro lower across the board.

Europe's engine room failed to grow on the quarter for the second time in a year while it was revealed last month that France and Italy's economies both contracted in the final three months of the year.

"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 latest soft indicators and industrial data for December do not bode well for the short-term outlook, said Carsten Brzeski, chief economist for ING Germany.

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