German economy slowed in 2018, but dodges year-end recession

FRANKFURT – Germany’s economic growth slowed last year amid signs of wider global weakness, but statistics officials said Europe’s dominant economy at least escaped a feared recession in the fourth quarter.

The government statistics agency said the economy grew 1.5 per cent, which is down from 2.2 per cent in 2017 and is the weakest rate in five years.

Growth in the traditionally export-oriented country was supported by rising spending at home by consumers and the government, the agency said. Unemployment remains low at 3.3 per cent and the economy has grown for nine straight years.

The weak patch in Germany has fed fears about the strength of the 19-country eurozone economy, which faces headwinds from weakening global trade and worries about a possibly messy departure by Britain from the European Union. Conflict between the U.S. and China over import tariffs and trade has weighed on business confidence.

The European Central Bank has indicated that if the economy worsens it could postpone a first interest rate increase beyond the earliest possible date in the fall of 2019. Some recent market indicators have shown that investors assumed rates would stay at current record lows through late 2020.

Worsening economic data had raised fears that Germany may have turned in another quarter of contraction in the fourth quarter, for which figures will be reported Feb. 14. German output fell in the third quarter by 0.2 per cent, though the dip was attributed to temporary factors such as bottlenecks registering cars under new emissions testing rules. Two straight quarters of falling output is one definition of a recession.

The statistics agency said there were “signs of a slight recovery” in the fourth quarter compared with the third. Agency official Tanja Mucha said “we are not assuming a minus” in the fourth quarter, but cautioned that the figures are still preliminary.