When Germany sneezes, the rest of Europe catches a cold

Economic growth on the other side of the Rhine slowed sharply in the second half of 2018. For the whole of last year, the growth rate of GDP lost one point to 1.5% (against 2.5% in 2017). Several factors are the reason.

Firstly, following the introduction of the new European emission standards for motor vehicles, the production of these vehicles plummeted by more than 10%. Indeed, the automobile industry has not succeeded in producing cars that meet these new standards. Secondly, global trade has fallen in recent months, penalising the entire export sector. Finally, household consumption also slowed at the end of 2018 due to the acceleration of inflation, which had an impact on purchasing power. For the coming months, if private consumption is not expected to slow further, supported by a well-oriented labour market, a low unemployment rate and the acceleration of wages, the situation is different in the industry. Indeed, uncertainties accumulate especially in the automotive sector. With the new emission standards, there is now also the risk of new customs taxes in the United States.

In the end, the industrial activity in Germany should continue to slow down in the coming weeks, or even contract. This will obviously impact all European suppliers. The slowdown in activity could therefore also be felt in Switzerland.