Germany: Q2 GDP details hint a "technical" but no "severe recession" – Deutsche Bank

According to Deutsche Bank’s analysis team, today's 2nd release confirmed the preliminary reading of the German Q2 GDP growth of -0.1% qoq and corrected for the lower number of working days it was up 0.4% while domestic demand rose a healthy 0.5% qoq.

Key Quotes

“Net trade subtracted a 0.5 pp from Q2 GDP growth with exports falling a hefty 1.3% qoq while imports decreased by 0.3% qoq.”

“Capex investment picked up by 0.6% qoq (Q1: 1.4%) while construction investments were down 1.0% qoq (Q1: 2.5%), partly a payback for the weather-related surge in Q1.”

“In H1 the German government sector recorded a surplus of EUR 45.3 bn (or 2.7% of GDP). That said, it is important to note that these figures are preliminary and have only limited informative value for the overall 2019 budget results.”

“Yesterday's sharper than expected drop in the ifo climate index was part of a row of negative sentiment and hard data, particularly for manufacturing. This supports our expectation that GDP will shrink by around ¼% qoq in Q3, pushing the German economy into a "technical recession".”