Germany downplays stimulus hopes as economy escapes recession - business live

Rolling coverage of the latest economic and financial news, including German growth figures

• Latest: German finance minister says there's no crisis
• Breaking: Germany grew by 0.1% in the last quarter
• Consumer spending, government and exports lifted growth
• But Q2 GDP revised down to -0.2%
• Weak Chinese data shows slowdown continues

3.37pm GMT

Time for a very quick recap

3.20pm GMT

The escalating crisis in Hong Kong continues to weigh on markets today, after a fourth day of serious protests in the city.

Airline Cathay Pacific and fashion chain Burberry both reported that their trading has been disrupted by the pro-democracy demonstrations. This is likely to continue, as clashes between protesters and riot police intensify.

Burberry and Cathay Pacific profits dented by Hong Kong protests https://t.co/nTTeCWH2xp

3.04pm GMT

Looks like Christine Lagarde has been trying to smooth rifts in at the European Central Bank.

The new ECB president has taken her colleagues for an away day to discuss how to improve things, following the disputes over predecessor Mario Draghi's stimulus moves.

I was pleased to invite my new Governing Council colleagues to join me at an off-site retreat yesterday. We discussed in an open and informal setting the running of the Governing Council. pic.twitter.com/ifMxiNh7uh

2.44pm GMT

Stocks have dipped very slightly at the start of trading in New York.

The Dow, which hit yet another record high last night, dropped by about 0.1%.

STOCKS AT THE OPEN:
- Dow down 25.32 points
- Nasdaq down 23.58
- S&P down 4.35 pic.twitter.com/JufaJRfpJM

2.21pm GMT

If Berlin won't boost government spending, then Germany's recovery could depend on a pick-up in global growth.

And *that* could rely on the US and China, who are still to resolve their trade dispute.

"Since the global economy is currently in a manufacturing recession, and Germany is a manufacturing powerhouse, it is no surprise that the German economy is bearing the brunt of the slowdown. Domestic demand isn't enough to offset this global drag.

On an overall basis, Europe is a taker of global growth while China and the US are the main contributors. What we see as a more important forecaster of German GDP is the direction of U.S. and Chinese growth. If the German economy is going to do better, China needs to do better first."

1.43pm GMT

The number of Americans filing new employment claims has risen.

The US initial claims total jumped to 225,000 people last week, up from 211,000 in the previous seven days.

US Weekly Jobless Claims come in at 225k exp: 215k, prev: 211k

1.24pm GMT

Newsflash: Germany's finance minister has just dampened hopes of a new stimulus package to support growth.

Olaf Scholz told a conference in Berlin, organised by Bloomberg, that Germany was not in an economic crisis. As such, there is no immediate need for a spending boost, he argued.

"We are cautiously optimistic. We will have bigger growth next year."

German FinMin Scholz: Q3 GDP figures could end debate on stimulus package. German econ not in crisis, no need for stimulus now. (BBG) pic.twitter.com/rZVsNaalNp

German Fin Min Scholz: German economy not in crisis, no need for stimulus now. (BBG). #euro #ecb

Those who hoped for German stimulus had a BAD day today.

First a positive GDP print for Q3

Then, Germany's Scholz: German economy not in crisis, no need for stimulus now BBG.

Sorry to say, fiscal stimulus AINT coming. Over to you ECB.

12.38pm GMT

Here's our news story on the UK retail sales slowdown:

Related: UK retail sales hit by surprise downturn despite big discounting

12.17pm GMT

Most advanced economies has now reported growth figures for the last quarter (although we're still waiting for Canada!).

Germany, despite avoiding recession, is one of the weakest performers in July-September.

14 OECD countries have now reported GDP growth stats for Q3 2019. Lithuania still top (3.6%y/y). UK (1%y/y) 4th of the six G7 countries that have reported. Germany (0.5%y/y) & Italy (0.3%y/y) both below. US (2%y/y) out front with Canada left to report. pic.twitter.com/oWdq2iRLMM

11.22am GMT

European Central Bank's Vice President Luis De Guindos has predicted there's a "very low" risk of a eurozone recession, now that Germany has returned to growth.

However, he also fears that growth could remain below potential, unless governments step up and do more.

De Guindos made the comments after data showed the euro zone's largest economy, Germany, narrowly avoided falling into a technical recession of two consecutive quarters of economic shrinkage.

Europe was in a place where growth remained "below potential" De Guindos said at a BNP Paribas banking conference, adding that the ECB needed "to pay close attention" to the situation.

11.19am GMT

"Stabilisation, not recession." @ClausVistesen on GDP & Employment, #Eurozone, Q3 #PantheonMacro

10.36am GMT

Here's a round-up of reaction to Germany's economy growing by 0.1% in the last quarter, avoiding the recession which many analysts expected.

"We know uncertainty is a killer for the economy. UK growth was the slowest in a decade. Germany has only narrowly avoided a recession, but it's not out of the woods just yet. Now the effects of uncertainty have become reality. Companies are having to deal with the consequences of the global economic meltdown - margins are squeezed, output is down and balance sheets are weak.

"With fewer than one in five CFOs willing to take on risk, we'll see slashed budgets for companies going into 2020. People are going to start feeling the impact from fewer jobs and frozen wages as companies remain inhibited by the uncertain economic outlook."

Growth surprised on the upside. The construction sector continues to run above capacity and is lending support to growth.

This doesn't change our narrative. Underlying growth trend is weak and the economic outlook remains subdued. Germany avoided a technical recession but will continue to pose very low growth rates over the next year. Important trading partners like China, the US, Turkey and Sweden are experiencing an economic slowdown, and high-frequency indicators show the services sector slowing down. Employment prospects are also gloomy.

"The German economy avoided a technical recession in 3Q, by posting this morning a surprise positive +0.1% 3Q QoQ GDP growth (vs -0.1% expected). At the same time, however, 2Q GDP growth was revised downwards to -0.2% QoQ (from -0.1% QoQ previously). Effectively, it leaves the German economy close in stagnation.

.... That today's number is better than slightly expected is potentially the worst of both worlds" not strong enough to assuage growth fears in the Eurozone and not weak enough to push Germany into a meaningful fiscal response.

10.32am GMT

Japan's economy has also been hit by the US-China trade war and the weakening global economy.

Japan's GDP grew at an annualized pace of 0.2% in Q3 QoQ vs 0.9% expected, stuttering from revised growth of 1.8% in the April-June period. H/T @Schuldensuehner
USD/JPY
108.700 pic.twitter.com/CYkPirW7Uc

10.08am GMT

Just in: The eurozone grew by 0.2% in the third quarter of the year, helped by the modest recovery in Germany.

That's according to the latest GDP report from Eurostat, which confirms last month's 'flash estimate'.

Euro area #GDP +0.2% in Q3 2019, +1.2% compared with Q3 2018: flash estimate from #Eurostat https://t.co/uzvre7SHW3 pic.twitter.com/eB1TLNMyse

10.01am GMT

Just in: UK retail sales were weaker than expected last month.

Retail sales volumes fell by 0.1% during October, the Office for National Statistics says. Economists had expected a rise of 0.2%. Strip out petrol, and volumes were down 0.3%.

Latest retail sales numbers suggest consumers may be running out of steam, with volumes up 0.2% in three months to Oct - that growth driven by flurry of promotional activity as retailers try to lure them in & food (stockpiling?)

Customary health warning. The retail sales monthly changes figures don't tell us much about anything. Treat with caution. Or over-analyse the life out of it, whatever floats your boat... pic.twitter.com/Elaqe3pVrF

9.55am GMT

NEWSFLASH: UK services company G4S has been sensationally blacklisted by Norway's sovereign wealth fund, for human rights abuses.

In a stinging rebuke, the Norway's Council of Ethics said the company was contributing to "systematic human rights violations" of migrant workers in Qatar and the United Arab Emirates.

In April 8, 2019, the Council on Ethics recommended that G4S PLC (G4S) be excluded from the Government Pension Fund Global (GPFG) because of an unacceptable risk of the company contributing to systematic human rights violations.

The Council's investigations show that workers have paid recruitment fees to work for the company, and that workers have taken out loans in their home country to be able to pay the fees.

Related: Norwegian wealth fund blacklists G4S shares over human rights concerns

Related: Revealed: hundreds of migrant workers dying of heat stress in Qatar each year

9.46am GMT

Car giant Daimler has highlighted the challenges in Germany's economy, by announcing major job cuts.

My colleague Jasper Jolly explains:

Mercedes-Benz plans to save a1.65bn (1.4bn) by cutting more than 1,000 jobs in the latest sign German carmakers are struggling to make big investments in electric car technology.

Carmakers around the world are spending billions on developing battery-powered electric vehicles but at the same time sales of internal combustion engines are slowing in the face of economic weakness and scandals over emissions.

Related: Mercedes-Benz to axe more than 1,000 jobs in cost-cutting drive

9.36am GMT

Germany's return to (modest) growth may lift some pressure from Angela Merkel's government to boost spending. But that could be a mistake.

In terms of German fiscal policy only 4% thought Germany should stick to "black zero" type policies and only an additional 15% thought they should wait for a deep recession to deploy fiscal. 81% thought they should be either expanding fiscal now (33%) or be ready to do so over the next 12 month if growth stayed weak but positive (48%).

9.19am GMT

European stock markets have all fallen this morning, despite Germany's better-than-expected growth report.

The Chinese economy continues to cool down as the latest economic reports showed overnight. Fixed asset investment, retail sales and industrial production came in at 5.2%, 7.2% and 4.7% respectively.

All reports registered declines in addition to undershooting economists' forecasts. Mining stocks are largely lower this morning on the back of the data from China, as the country is a major importer of minerals.

8.54am GMT

Germany's escape from recession is being overshadowed by weak economic data from China.

Fixed asset investment growth has fallen to its lowest level on record, at 5.2%, the National Bureau of Statistics reported. That suggests companies are reluctant to invest.

#CHN China triple disappointment:
1/ Industrial production ai
2/ Fixed asset investments ai
3/ Retail sales ai

All three releases disappointed analyst expectations.

8.33am GMT

There are some signs that Germany's economy could pick up, having effectively stagnated for the last six months, says Lee Hardman of Japanese bank MUFG.

He tells clients:

Continued growth in the service sector has helped to offset more acute weakness in the manufacturing sector.

Recent leading indicators have provided tentative signs of optimism that the German economy is close to the worst point and could begin to pick up gradually in 2020. The latest ZEW survey, trade, factory orders reports have all surprised to the upside. The global manufacturing PMI bottomed in July providing encouragement that the global industrial slowdown is beginning to ease as well

8.27am GMT

Germany's car sector is dragging the economy back, warns Deka bank analyst Andreas Scheuerle.

He says (via Reuters):

"The German economy got away with a black eye: the technical recession [is] avoided."

"Germany's economy is suffering from enormous global political uncertainty. Germany's flagship industry, the automobile sector, is not running smoothly anymore."

8.03am GMT

Germany's government isn't popping the champagne corks, despite avoiding the ignominy of recession this morning.

Economy minister Peter Altmaier has warned that growth is still too low, telling the ARD TV station that:

"We do not have a technical recession, but the growth numbers are still too weak"

7.41am GMT

Carsten Brzeski, European economist at ING, says Germany's economy is effectively stagnating -- despite dodging recession this morning.

He points out that German manufacturers, once a powerhouse of the EU, are really struggling:

Recession or not, the German economy has fallen into a de facto stagnation, with quarterly GDP growth averaging a meagre 0.1% QoQ since the third quarter of last year.

In fact, the German economy can still be divided into two worlds: the depressive world and the happy-go-lucky one. In the depressive world, there are very few signs of an imminent bottoming or recovery of the manufacturing sector since the summer of 2018. The sector is facing and will continue to face cyclical challenges, as ongoing trade conflicts, Brexit uncertainty and slower Chinese growth, along with structural challenges, disrupt the automotive industry. In the happy-go-lucky world, private consumption remains solid on the back of low inflation, low interest rates and a still-strong labour market. The construction sector keeps on booming and the government is also inserting some fiscal stimulus.

Looking into 2020, it looks as if either the cyclical factors weighing on German industry will dissipate somewhat, with the entire economy rebounding, or the domestic part of the economy will also slow down. Either way, don't forget that the structural challenges will not quickly and easily disappear, keeping a clear cap on any German rebound in 2020.

Germany: Did anyone say 'recession'? | Snap | ING Think - Strong private consumption and exports helped the German economy to avoid recession in the third quarter https://t.co/CCx32GU68C

7.32am GMT

Economists are pleased to see that Europe's largest economy has dodged recession.

However, Fred Dukrozet of Swiss bank Pictet points out that it was pretty close -- Germany actually only grew by 0.08% in the last three months.

Keine Rezession! German GDP rose 0.08% QoQ in Q3, following a downwardly-revised -0.24% in Q2. @destatis_news notes that consumptions was the main contributor to growth, exports rose, imports flat, but capex excluding construction contracted. pic.twitter.com/pJKi4zB1nk

7.26am GMT

Increased spending by German consumers and government bodies helped to drag its economy out of recession, today's GDP report shows.

Exports have also picked up, despite trade tensions, helping the economy to expand by 0.1%.

Compared with the second quarter of 2019, household final consumption expenditure increased, and so did government final consumption expenditure. Exports rose, while imports remained roughly at the level of the previous quarter. Also, gross fixed capital formation in construction was up on the previous quarter.

Gross fixed capital formation in machinery and equipment, however, was lower than in the previous quarter.

7.12am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It's a particularly Guten Morgen in Germany today. The economy has just avoided recession with a surprise return to growth in July to September.

German economy avoided recession with surprise growth. #Germany grew +0.1% in Q3 QoQ vs -0.1% expected. pic.twitter.com/da9yI0AhRK