German growth hits speed bump

German economic growth slowed more sharply than expected in the third quarter, official data showed Tuesday, but analysts see Europe's largest economy bouncing back at year's end.

Gross domestic product grew by 0.2 percent compared with the second quarter, adjusting for price, seasonal and calendar effects, the federal statistics office Destatis said in provisional figures.

Analysts surveyed by Factset had forecast growth of 0.3 percent between July and September, after the economy expanded by 0.4 percent in the second quarter and 0.7 in the first.

Slower third-quarter growth "points towards a bump in the road but not to a turning towards general and longer lasting weakness," Unicredit economist Andreas Rees wrote.

Most of the growth was driven by domestic consumption, Destatis said, with rises in both household and public spending.

Meanwhile, exports -- long the motor of the German economy -- slowed slightly compared with April to June, alongside a small increase in imports.

But a positive purchasing managers' survey -- an indicator of future activity -- in October and business confidence at a two-year-high have stoked hopes of an economic rebound in the final quarter.

Private consumption is expected to remain strong, while improved indicators abroad point to renewed growth for exporters, analyst Andreas Scheuerle of Deka bank wrote.

"'Summertime Blues' should be followed by a healthier-sounding 'Rocking around the Christmas Tree'," he predicted.

- Boon or bane? -

The Bundesbank, Germany's central bank, expects the economy to grow by 1.7 percent over the full year, while the federal government projects a slightly more optimistic 1.8 percent.

Observers will look to a business confidence survey later in November for signs of how the economy will react to Donald Trump's election as US president, Unicredit's Rees noted.

Trump's anti-trade campaign rhetoric could signal new headwinds for German businesses, which exported more to the US than to any other country in 2015, at almost 114 billion euros ($123 billion) according to Destatis data.

"A more isolated US economy would be bad for trade and thus German exporters," Johannes Gareis of Natixis bank wrote.

On the other hand, "the German economy might benefit from Trump if his plans to cut taxes and to increase infrastructure spending succeed in boosting the US economy," he went on.

German fears of a blow to trade from June's shock vote by British citizens to quit the European Union have receded as it becomes clear that divorce proceedings will be drawn out over years.

The referendum result prompted a plunge in German business confidence in July and August before the mood recovered in September and October.

Britain is Germany's third-largest export customer after the US and France, buying 89 billion euros of German products in 2015.

Source: AFP