New data from the Federal Statistics Office shows that the German economy has slumped back to growing at its slowest rate since 2016. A Reuters poll of 34 economists pointed to expected average expected growth of 0.4 percent, with forecasts ranging from 0.2 percent to 0.5 percent.
DekaBank analyst Andreas Scheuerle remains confident and pointed to continued strong foreign demand and vibrant domestic activity due to record employment and rising real wages. He said: “Is it a pause or a fundamental shift? For us the answer is clear: It’s just a blip.
“However, this should not hide the fact that risks to the economic outlook have risen not least due to the neo-protectionist aspirations and sanctions policy of the US government.”
Germany’s statistics office said that while domestic spending was up, international trade was weak.
The Eurozone’s top economy was expected to grow at 2.4 percent but fell short at 2.3 percent in the first quarter.
The German government expects the economy to bounce back in the second quarter due to full order books and high employment.
Economists blamed the slowdown in the first quarter on a flu epidemic, an unusually high number of strikes and an above-average number of holidays.
But there could be more misery to come with Germany now finding itself at the sharp end of President Donald Trump’s “neo-protectionist aspirations” relating to sanctions on Russia, aluminium and steel, and now the renewed threat of sanctions against European firms following Washington’s decision to pull out of a nuclear deal with Tehran.
German Foreign Minister Heiko Maas admitted earlier this week that it could be difficult to protect European firms from any fallout from the US decision, with the US ordering German firms to comply with all US sanctions on Iran or face stringent penalties.
Mr Maas told the Bild am Sonntag newspaper: “I do not see a simple solution to shield companies from all risks of American sanctions.”
Economy Minister Peter Altmaier said Germany viewed Mr Trump’s unilateral withdrawal from the nuclear pact as wrong and claimed the president’s actions could lead to a “worldwide escalation of unilateral measures”.
Mr Altmaier said there was a deadline of up to 90 days for foreign firms to comply with US sanctions or face penalties.
He said: “In this time, we’ll use all possibilities to persuade the US government to change its behaviour.”
“That can be achieved through talks and by explaining that everybody will be losing in the end if we are running into a worldwide escalation of unilateral measures.”