Mubasher: German economy contracted in the third quarter of 2018, as auto manufacturers struggled to adapt to a new emissions-testing protocol and trade rows dented exports.

Gross domestic product (GDP) in Europe’s largest economy shrank by 0.2% in the three months ended last September, the Federal Statistical Office (Destatis) said on Wednesday.

This marked Germany’s first quarter-on-quarter decline since 2015.

“The slight decline in GDP compared to the previous quarter was mainly due to foreign trade developments: provisional calculations show there were fewer exports, but more imports in the third quarter than in the second,” the Destatis said.

However, German economy grew 1.1% in the third quarter, compared with the same quarter of the prior year.

The Centre for European Economic Research (ZEW) on Tuesday said that investors did not expect the economy to rebound rapidly from the weakness in the third quarter.

Weak result was largely ascribed to one-off factors, most specifically bottlenecks in the approval of vehicles in the wake of the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions-testing protocol.

“Both exports and consumer spending could rebound in the coming quarters as car producers make up for lost time and car spending increases accordingly,” Capital Economics senior European economist Jennifer McKeown told BBC, warning that “exports growth would remain on a downward trend as global demand softens further.”

By 9:25 am GMT, the EUR/USD pair went down 0.06% to $1.1283.