The German economy is moving sideways. After the slight decline in economic output in the third quarter, real gross domestic product in the final quarter of 2018, increased only slightly by 0.02% in seasonally adjusted terms compared with the previous quarter.
Industrial production rose only slightly in December with a plus of 0.2% compared to the previous month. On average in the fourth quarter, production thus fell sharply by 1.6% compared with the third quarter.
The Italian economy slipped into recession in late 2018 - the third one since 2008. In particular, the budget dispute with the EU Commission weighed on economic activity last year.
Preliminary GDP data confirmed that the Eurozone economy ended 2018 on a weak note. While fundamentals remain positive: the labor market continues to expand and financial and monetary conditions remain accomodative, elevated uncertainty is likely to weigh on economic activity in 2019. We expect GDP growth to slowdown to +1.6% in 2019 from +1.8% in 2018. Risks to our forecast remain on the downside.
The sentiment in the German economy deteriorated considerably in January. The ifo business climate index fell to its lowest level for almost three years.
The increased risks associated with Brexit, the trade dispute, political protests in France and problems in the automotive sector once again put the brakes on the EMU economy in January.
At 1.5%, the German economy last year recorded its weakest GDP growth since 2013. Calendar-adjusted GDP growth also expanded by 1.5% following a whopping 2.5% in the previous year.
