German economy slumps to weakest growth in five years sending the euro down sharply

The German economy grew at its weakest rate in five years in 2018 sending the euro down and further signalling a global downturn.

Europe’s largest economy’s GDP grew by 1.5 per cent last year, compared with 2.2 per cent the previous year, according to data from the country’s Federal Statistics Office.

The euro fell 0.3 per cent to $1.143 in early trading and the yield on Germany's 10-year government Bund dropped four basis points to 0.2 per cent.

But the Eurozone powerhouse may have narrowly avoided a technical recession as the Federal Statistics Office said the economy was likely to have grown slightly in the fourth quarter.

Weak industrial data, and a contraction in GDP in the third quarter had led to concerns the country would enter recession – defined as two or more consecutive quarters of contraction.

“The German economy thus grew the ninth year in a row, although growth has lost momentum,” the Federal Statistics Office said.

It said domestic demand was the main driver of growth, while household consumption was also up one per cent on the previous year.

German exports grew at a slower pace than in previous years, while a larger increase in imports tipped the balance and had a “slight downward effect” on GDP.

Danske Bank research analysts said that despite “recent weakness” they expected expansion would continue in 2019 driven by domestic demand.