What's going on?

Germany, Europe�s biggest economy, appears to have narrowly dodged a dreaded recession last quarter � but still reported its weakest growth in five years… (tweet this)

What does this mean?

Preliminary economic data out of Germany on Tuesday suggested the country�s economy grew just 1.5% last year � its slowest growth since 2013. In the third quarter of 2018, the German economy actually shrank. Although full figures for the end of the year are yet to come, it seems Germany is likely to have avoided the second consecutive quarter of contraction that would have placed it in technical �recession�. Not that that’s saying much…


Germany is a big manufacturer and exporter, so it�s pretty sensitive to the global trade climate. The country�s industrial production fell in October and November as worldwide demand for its products dropped. Germany counts the US, China, and the UK among its biggest markets; and with the US-China trade war going strong at the time and Brexit Britain characteristically gloomy, Germany suffered.

Why should I care?

For markets: Investors yield to temptation.

German government bond yields fell on Tuesday as the prices of the bonds themselves rose (i.e the fixed annual payouts such bonds offer represented a lower percentage of their cost). Government bond yields also fell across the eurozone � to six-month lows. Falling yields don�t bode well for German stocks: rather than backing companies, investors are seeking safer options.

The bigger picture: Safety first.

While investors are scrambling to lend to governments, they�re increasingly concerned about lending to companies. In an influential survey of professional investors out on Tuesday, the level of corporate debt relative to companies� profits ranked as the biggest worry for the first time in a decade. With investors� outlook on global growth also its worst since 2008, that�s perhaps no surprise. At least the big Wall Street banks might see better fixed-income trading this quarter…