Commentary: Germany’s GDP growth slows down

   The German economy is one of the most productive in the world, but recent headwinds have caused growth to slow along with the rest of the European Union. 
   Germany’s gross domestic product grew at a rate of 1.5 percent year-over-year in 2018, and although the country’s economy has expanded for the past nine years, 2018 was the slowest rate of growth since 2013, as illustrated in the graph below, which was built using data from the World Bank.


  
   In 2009, following the worldwide financial crisis, the German economy contracted at a rate of 5.6 percent. As the graph shows, the German economy recovered in 2010 and 2011, partly due to the European Central Bank keeping interest rates artificially low after the financial crisis. This allowed Germany to maintain economic growth for almost a decade.
   In theory, low interest rates spur growth, but several other factors helped influence Germany’s growth. The largest factor is Germany’s status as the top exporter in the world. According to the CIA World Factbook, when measuring by net trade in goods and services, Germany had an account surplus of $291 billion in 2017. The next closest competitor was Japan, which had an account surplus of almost $100 billion less in 2017. 
   As the top exporter in the world, Germany depends on its manufacturing sector, similarly to other exporting nations such as Japan and China. According to the Organization for Economic Co-operation and Development (OECD), German industry accounts for more than 30 percent of GDP, while only 24 percent of the labor force worked in industry in 2017. This means German industry per capita greatly outperforms the services sector. 
   Germany’s industrial output differentiates it from other developed economies, such as the United States. The U.S. is currently running a net trade deficit due to a less industrious economy. According to the OECD, industry accounts for less than 20 percent of GDP in the U.S., while more than 20 percent of the labor force works in industry. This causes Germany to have a competitive advantage over the U.S. in manufacturing and exporting goods. 
   Another factor influencing GDP growth in the German economy is unemployment. After the European Central Bank lowered interest rates, private investment in Germany increased, causing unemployment to drop, as shown by the graph below. This graph was created using data from the OECD and negatively correlates with GDP growth, being that as unemployment rates fall, GDP growth increases. 


  
   At Bluewater Reporting, exporting countries such as Germany are closely monitored for externalities that can negatively impact the ocean liner shipping industry. Germany has prominent trade ties with North America and Asia, which can be monitored using the Bluewater Reporting Trade Route Report.
   From Germany/Benelux to North America, there are currently 18 fully cellular container services collectively deploying 100 containerships with a total deployed capacity of 459,230 TEUs. Each week, 58,349 TEUs are allocated toward the trade. The graph below, built using data from BlueWater Reporting, shows the distribution of total deployed capacity by carrier from Germany/Benelux to North America.


  
   Meanwhile, there are currently 17 fully cellular container services offered from Germany/Benelux to Asia that collectively deploy 185 containerships with a total deployed capacity of 2.93 million TEUs. Each week 170,304 TEUs are allocated toward the trade. The graph below, built using data from BlueWater Reporting, shows the distribution of total deployed capacity by carrier from Germany/Benelux to Asia.


  
   In the future, Germany will be dependent upon consumption from Asia and North America to drive economic growth. If consumption increases, Germany will be able to export more goods and experience high productivity. If another economic crisis happens in either of these trade regions, Germany would be negatively impacted more readily than countries that are not as dependent upon exports and manufacturing.

© 2019 BlueWater Reporting (www.BlueWaterReporting.com) Used with permission