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German Economy Shrinks Most Since Early 2013

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Germany's economy contracted at a faster-than-expected pace in the third quarter, marking the first decline since the first three months of 2015 and the worst fall since early 2013, preliminary figures from the Federal Statistical Office showed on Wednesday.

Gross domestic product declined a seasonally and calendar-adjusted 0.2 percent in the three months to September, after expanding 0.5 percent in the second quarter. Economists had forecast a 0.1 percent drop.

The latest decline in GDP was the worst since the first quarter of 2013, when the economy shrank 0.3 percent.

On a calendar-adjusted basis, the GDP rose 1.1 percent year-on-year following a 2 percent growth in the previous quarter. Economists had predicted a 1.3 percent gain.

The year-on-year gain was the smallest since the third quarter of 2013, when the economy grew only 0.7 percent.

The slight quarter-on-quarter decline in the gross domestic product was mainly due to the development of foreign trade, the statistical office said. Exports decreased, while imports were up in the third quarter of 2018 compared with the second quarter of the year.

Domestic demand gave mixed signals, while gross fixed capital formation both in machinery and equipment and in construction was higher than in the previous quarter. Final consumption expenditure of households declined, while government final consumption expenditure was slightly higher than in the previous quarter.

"The outlook for the German economy is still positive and swan songs will have a short shelf-life but the reputation of the invincible strong man (or woman) of Europe has received some scratches," ING Bank economist Carsten Brzeski said.

"After the latest political developments, today's disappointing growth data is yet another wake-up call that political stability and strong growth are by no means a given."

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