Germany’s second estimate of GDP was just released, confirming the feeble 0.1% expansion of Europe’s biggest economy in the third quarter. But the figures also come with more details, showing how Germany’s dismal investment position is dragging on growth.
Private consumption rose by 0.4%, and government spending grew 0.1%, but it’s easy to see from this chart what held back the economy:
Investment dropped 0.7% and inventories fell 0.5% in the same period, adding to the growing pile of evidence that Germany needs more public investment, even if that means not reaching its balanced budget goals.
German investment is now actually at a lower level than it was five quarters ago, a pretty dismal sign for Europe’s largest economy. According to the IW Institute, an economics think tank, German companies are shying away from spending because of high energy prices and labour costs. The country’s nuclear moratorium has increased Germany’s reliance on more expensive renewable energy and coal, and an incoming minimum wage hike is likely to raise bills for pay in 2015.
Germany has also seen some dire industrial figures in recent months. Though the country is still avoiding recession, if the rest of the eurozone slows or falls into crisis again, it now seems unlikely that Europe’s biggest economy will be providing much of a positive counterweight.