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Surprising Economic Growth: Five Reasons Why Germany Crashes the Recession – Economy

Entrepreneurs can breathe easy. The German economy narrowly missed the recession again in the third quarter. The gross domestic product increased slightly between August and October by 0.1 percent, as the Federal Statistical Office announced on Thursday. Experts had feared a loss in the run-up and this for the second quarter in a row, with which Germany would have fallen into recession on paper.

There are several reasons why German business is doing better than expected.

1) The crisis is limited to industry

At the moment, there is one particular problem for industry: the industry – that is, auto companies, mechanical engineers, suppliers. They sensed the weakening global economy and the uncertainty caused by the trade war. Recently, however, their situation has also improved a bit: "The industry is still in a recession, but the pace of the decline in production has slowed down," says Ifo CEO Timo Wollmershäuser.

For example, exports rose again after corporations found it difficult to sell their goods overseas in the previous quarter. Experts also believe that the situation industrial companies will continue to improve. "The likelihood of a hard Brexit or a further escalation of the US-based trade war has diminished in recent months," says Wollmershäuser.

And: unlike in the industry, it continues to do very well in other industries. In construction, in services, in commerce, entrepreneurs can hardly complain about lack of orders.

2) The consumption of Germans continues

The fact that the economy is still doing so well despite the weakness in the industry is mainly due to strong consumption. Consumers have barely been influenced by the meager economic figures in recent months and continue to spend a lot of money.

This benefits retailers from the electronics market to the bookstore, as well as hairdressers, restaurants, taxi operators and craftsmen. And experts assume that this consumption will continue. For the Christmas business, for example, expects the trade association Germany (HDE) with a new record. More than 102 billion euros should spend the Germans in this November and December, predicts the Association.

3) The labor market is stable

The fact that Germans are currently so consumed by consumption is also due to the strong labor market. Because despite the weak economic development, the number of unemployed has recently declined further. In October, the unemployment rate fell to 4.8 percent.

The reason: In view of the shortage of skilled workers, the companies try to postpone layoffs as long as possible. Even industrial groups that are currently suffering from a slump in orders prefer to opt for short-time working instead of dismissals. Too great is fear of not finding new professionals when things start to go up again.

4) Consumers have more money in their pocket

Not only do many people currently have a job. Many have recently benefited from rising wages. This is especially true for those who are paid by tariff. For example, wage rates in public administration (plus 5.3 percent) and construction (plus 4.6 percent) have been particularly strong.

In addition, the state has increased its transfer payments: Both pensions and child benefits have increased.

5) A small kink in economic performance is normal

The German economy has grown ten years at a stretch – which is extremely unusual. Such a long upswing has not existed since the post-war period in this country.

Normally, the economy grows and falls in cycles: sometimes it goes uphill, sometimes downhill. Therefore, it is rather surprising that Germany was so good for so long. So even a weaker growth of 0.5 percent, as the economics forecast for this year, is still good.

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