According to Destatis,
- Household final consumption expenditure increased by 0.2% quarter-on-quarter.
- The German services sector contributed positively, with government final consumption expenditure rising.
- However, fixed capital formation in construction (-1.7%) and gross capital formation in machinery and equipment (-3.5%) impacted the economy.
- Trade terms also contributed negatively. In Q4, exports of goods and services declined by 1.6% quarter-on-quarter.
- Despite the gloomy report, the production of motor vehicles, trailers, and semi-trailers increased, bucking the broader trend across the manufacturing sectors.
Year-on-year, the German economy contracted by 0.2% in Q4 after contracting by 0.3% in the previous quarter.
Implications to ECB Monetary Policy
The German economy remains a focal point for the ECB. However, recent private sector PMI numbers likely eased immediate fear of the German economy dragging the Eurozone economy into a recession. Nonetheless, the threat of a technical German recession could pressure the ECB to begin discussing interest rate cuts.
EUR/USD Reaction to German Economic Data
Before the German GDP numbers, the EUR/USD fell to a low of $1.08148 before rising to a high of $1.08319.
However, in response to the GDP numbers, the EUR/USD fell to a low of $1.08238 before climbing to $1.08270.
On Friday, the EUR/USD was up 0.02% to $1.08253.
