Germany's economy grew for a ninth year in 2018 at the slowest pace in five years, largely driven by domestic demand, and likely avoided slipping into a technical recession in the third quarter.

Gross domestic product rose a price-adjusted and chain-linked 1.5 percent from 2017, when it expanded 2.2 percent, preliminary data from the Federal Statistical Office showed on Tuesday. The pace exceeded the average 1.2 percent growth rate of the last ten years.

Growth was the weakest since 2013, when the economy expanded 0.5 percent.

The reasons for slower growth included a weaker global economy and poorer sales in the automobile industry due to the implementation of the new WLTP emission tests regime, the Economy Ministry said.

Further, special effects such as the flu epidemic and strikes as well as low water levels due to the continuing drought also impacted economic activity, the ministry added.

On a price and calendar-adjusted and chain-linked basis, GDP grew 1.5 percent following 2.5 percent expansion in 2017. The growth rate was the weakest in three years after a 1.5 percent expansion in 2015.

In 2018, household spending rose 1 percent and government final consumption increased 1.1 percent.

Gross fixed capital formation rose 4.8 percent and exports increased 2.4 percent. Imports climbed 3.4 percent. The balance of net trade deducted 0.2 percentage points from the German GDP growth.

Data also showed that the general government surplus was EUR 59.2 billion in 2018 versus EUR 34.0 billion in 2017.

The German economy shrunk for the first time since early 2015 in the third quarter and at the fastest pace in nearly six years, mainly due to weak exports and car sales. GDP fell 0.2 percent quarterly, marking the worst decline since the first quarter of 2013. Another contraction in the fourth quarter would mean the biggest euro area economy slipped into a technical recession, which is two consecutive quarters of negative growth.

The dampening impact from the WLTP tests implementation is gradually coming to an end and the economic output likely rebounded in the fourth quarter from the decline in the previous three months, the Economy Ministry said.

Order backlog remains high and the construction industry is in a boom, the ministry noted. Further, tax cuts and monetary benefits are set to boost consumer spending at the start of the year.

Thus, the German economic growth is set to get stronger at the start of 2019, the ministry added.

"Ultimately, there should be no recession because the low ECB interest rates will probably continue to fuel domestic demand and the Chinese economy will not collapse," Commerzbank Chief Economist Joerg Kraemer said.

"We are more concerned about the eroding quality of Germany as a production location."

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