Germany's Q3 growth slows

FRANKFURT • German economic growth slowed to the weakest pace in a year last quarter, a reminder of the fragility of the euro area's recovery in a time of rising uncertainty.

The slowdown in Germany to 0.2 per cent, along with a resumption of growth in Italy and France, left expansion in the 19-nation currency region at 0.3 per cent, in line with an initial estimate and matching the pace of the three months through June.

As Europe's biggest economy, Germany's fortunes are key to the recovery of the euro region, where the economy's expansion is stuck at mediocre levels.

That backdrop will colour the European Central Bank's (ECB's) review of its stimulus programme in less than four weeks, when it will also have to factor in a global outlook characterised by the rise of populists critical of international trade deals.

"The economy is growing in the euro area but still not quite helping the ECB meet its price-growth target of 2 per cent," said Mr Ralph Solveen, head of economic research at Commerzbank in Frankfurt. "It's probably not enough to satisfy them, and we think they will have to extend stimulus in December."

Economists forecast the euro area will keep its current pace of growth through the first half of 2017, then pick up to 0.4 per cent. Germany's third-quarter growth marked a slowdown from 0.4 per cent and fell short of the median forecast of economists.

Italy's economy, the euro region's third largest, grew 0.3 per cent, resuming expansion after stagnation in the three months through June. In the Netherlands, growth was unchanged from the previous quarter at 0.7 per cent.

The ECB's governing council will meet on Dec 8 to decide whether to extend its programme to buy €80 billion (S$122 billion) a month of debt through March. The central bank will also publish fresh economic forecasts that extend to 2019.

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A version of this article appeared in the print edition of The Straits Times on November 16, 2016, with the headline 'Germany's Q3 growth slows'. Print Edition | Subscribe