Germany’s economy emerged from stagnation at the beginning of 2019, returning to growth despite a slump in manufacturing that continues to plague the nation.
The figures, showing 0.4% growth, point to some strength across the euro area in the first quarter amid better-than-expected growth in a number of countries. But manufacturing remains weak and the region’s outlook is at risk of being sucked into an increasingly tense trade conflict between the U.S. and China.
In China, the economy continues to cool despite efforts by the government and the central bank. Data Wednesday showed slower growth in industrial output, retail sales and investment.
Germany’s first-quarter growth matched the median forecast of economists. The statistics office said consumer spending, construction and equipment investment boosted growth in the period, while there were “mixed signals” on trade.
Europe’s largest economy barely skirted a recession last year after it took a hit from factors including disruption to automobile production and low water levels on the River Rhine transport artery. While some of those issues have faded, more pronounced protectionist measures could damp business sentiment in the export heavy nation. Thyssenkrupp on Tuesday noted a ”weakening macro environment” as it reported a drop in profit.
An escalating trade war is “very difficult for any country or economy that is highly dependent on foreign trade like Europe, and particularly Germany,” said Erik Nielsen, chief economist at UniCredit Group. “They are going to be hit more than the others, so this is the big fear.”
Growth in Germany is forecast to slow to 0.5% this year from 1.4% in 2018, according to the government. Euro-area expansion is predicted by economists to ease to 1.2% from 1.9%.
In the first quarter, growth in the 19-nation region more than doubled amid a surge in Spain, resilience in France and a rebound in Italy.
Eurostat is expected to confirm first-quarter growth in the euro area was 0.4% in the first quarter when the figures are released at 11 a.m. in Luxembourg. Portugal is due to publish its data half an hour earlier and Italian industrial production is also on the calendar.
This article was written by Piotr Skolimowski from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to email@example.com.
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