Eurozone suffers worst growth since debt crisis as coronavirus darkens outlook

Economy

German economy records zero growth in fourth quarter

Private consumption and state spending have been providing growth impetus and, if those two sectors continue to weaken this year, the risk of recession will rise.

Andrew Kenningham, chief Europe economist at Capital Economics, said he thinks Germany's economy will remain at a standstill in the first half of 2020, which means a recession is "absolutely on the cards".

On the flip-side, the quickest pace of growth was seen Bulgaria (0.7%), Lithuania (1.3%) and Romania (1.5%).

Although the Commission left its growth forecasts unchanged it warned that the European economy still faces key downside risks, while indicating that Germany, Italy and France are likely to post the lowest growth for the year.

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Statisticians also revised their third quarter figures, saying that GDP had grown by 0.2 percent rather than 0.1 percent, and confirmed an annual growth rate of 0.6 percent in 2019.

German carmakers, which do big business in China, are exposed: Major automakers sold fewer than 2 million cars in China last month, an 18% plunge from a year earlier. Her conservative party is in crisis after an eastern branch voted with the far right to elect a state governor, forcing the leader of her Christian Democrats (CDU) to abandon her ambitions to succeed the chancellor.

Both Merkel's conservatives and their Social Democrat (SPD) coalition partners are likely to suffer losses in a national election.

These surveys were collected before the coronavirus outbreak, which could cut a little from GDP in the first quarter given Germany's exposure to global supply chains and demand from China, Mr. Kenningham said.

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"In general, the German economy remains stuck between solid private consumption and a paralyzed manufacturing sector", he said in an email.

Destatis, Germany's statistics body, reports that household and government spending both slowed in the last quarter, while investment from companies was mixed.

German output was unexpectedly stagnant in the fourth quarter as eurozone GDP growth slowed to 0.1pc compared to the previous three months, down from 0.3pc.

Germany was already in a feeble condition, logging growth of just 0.6% for the whole of 2019 amid weak global auto sales, the US-China trade war and uncertainty over Brexit.

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