German economy sees weaker-than-expected third-quarter growth

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German household spending was the sole driver of a weaker-than-expected economic expansion in the third quarter, more than offsetting a drop in business investment and government consumption over the summer months, data shows. details published today.

Gross domestic product in Europe’s largest economy rose 1.7% quarter-on-quarter in adjusted terms from July to September, the Federal Statistics Office said.

This is lower than a flash estimate of 1.8% published last month.

The data marked a slowdown in German growth from an upwardly revised 2% expansion from April to June. The economy contracted 1.9% in the quarter in the first three months of the year.

A 6.2% jump in consumer spending in the three months from July to September from the previous three months contributed 3 percentage points to the overall growth rate in the third quarter.

“This is due to catch-up effects in the service sector. Restaurants, bars and hotels have particularly benefited,” said Thomas Gitzel, analyst at VP Bank Group.

But Gitzel added that persistent supply bottlenecks in the manufacturing sector were holding back overall growth, translating into weaker business investment activity in machinery and buildings in the third quarter.

German government spending also fell in the quarter, further lowering the overall GDP figure.

A jump in new coronavirus infections in recent weeks now threatens to bring down Germany’s last pillar of growth in the last quarter.

“The aftermath of the pandemic is causing a kind of intermittent growth,” Gitzel said.

Separately, a survey by the GfK institute showed that surging coronavirus infections and unusually high inflation rates are weighing on German consumer sentiment, dampening business prospects for the upcoming Christmas shopping season.

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