July 25, 2021

The German economy is temporarily contracted by the automobile sector

The German economy is temporarily contracted by the automobile sector

The German economy contracted by 0.2% in the third quarter of the previous three months, a slowdown that experts attribute to the impact on the automotive industry of the new cycle of homologation of consumption and emissions WLTP in effect from 1 of September.

According to the Federal Statistical Office (Destatis) based on provisional data, this is the first decline in gross domestic product (GDP) since the first quarter of 2015, when it contracted 0.1%.

For the Ministry of Economy, far from a recession, "the dynamism of the economy only registered an interruption in the third quarter", marked by a weak private consumption, by imports, which contributed negatively to the growth of foreign trade and a notable accumulation of stocks.

The mandatory conversion to the new WLTP cycle (Globally Harmonized Testing Procedures for Light Vehicles) has caused a slowdown in approvals and the industry has concentrated on the production of the already authorized types, while private consumers, both in Germany and in abroad, they have opted to delay their purchases.

The growth in the third quarter has thus been slowed by up to 0.4%, the ministry says, recalling that the problem with homologations is a "temporary phenomenon" and predicts that once this slowdown has been gradually overcome, the impulse of the German economy will continue its course already in the last quarter of the year.

The economy had grown in the first half of the year, specifically 0.5% in the second quarter and 0.4% in the first, and in year-on-year terms, the growth between July and September was 1.1% .

Neither the president of the Bundesbank, Jens Weidmann, sees reasons for the pessimism and also alluded to the slowdown in production in the automobile sector as a cause.

"The fluctuation of figures up and down should not mislead: the momentum of the economy in Germany and the euro zone remains intact," he said at an event in Berlin, quoted by the economic newspaper "Handelsblatt."

However, according to the economic publication "Wirtschaftsdienst" Manuel Kallweit, of the Association of the Automobile Industry (VDA), there could be a certain optimism calculated, because this recovery is based on the fact that German manufacturers will not be excessively diminished its sales due to the diesel crisis and latent traffic bans.

The production of the German industry experienced in the third quarter a phase of temporary weakening due mainly to the situation in the automotive industry, but already in September it rose 0.2% with respect to the previous month and, in particular, in the sector of the Automobile rebounded 3.8% after a notable slowdown.

The order book of the German industry rose again in the last two months, the volume of orders is still extraordinarily high and the construction sector is in a flourishing stage, to which is added the good situation of the labor market.


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