Germany: Anemic GDP growth in Q2 adds to concerns of a fragile recovery in the region
September 1, 2011
In the second quarter, GDP expanded a seasonally and working-day adjusted 0.1% over the previous quarter, which marked a sharp deceleration compared to the revised 1.3% expansion tallied in the first quarter (previously reported: +1.5% quarter-on-quarter). The reading, which represented the slowest rate since the economy exited recession in the second quarter of 2009, confirmed the advance estimate released on 16 August and fell short of market expectations that had GDP growing 0.5%. The slowdown in the second quarter reflected a deterioration in the external sector and in domestic demand. Total consumption contracted 0.4% over the previous quarter on the back of a sharp fall in private consumption (Q1: +0.4% qoq; Q2: -0.7% qoq). In contrast, government consumption continued to grow in the second quarter, maintaining the 0.2% growth rate observed in the first quarter. Gross fixed investment decelerated sharply from a 4.5% increase in the first quarter to a 0.3% expansion in the second. The net contribution of the external sector deteriorated compared to the previous quarter as imports outpaced exports. Exports of goods and services grew 2.3% in the second quarter, slightly faster than the 2.1% increase observed in the first. However, imports almost doubled the pace from a 1.7% expansion in the first quarter to a 3.2% increase in the second. As a result, the net contribution of the external sector to overall economic growth deteriorated from plus 0.3 percentage points in the first quarter to minus 0.3 percentage points in the second quarter. At the sector level, growth in the second quarter was sustained by a rebound in agriculture, which expanded 2.5% (Q1: -1.1% qoq). Services increased 0.1% over the previous quarter, contrasting a 0.2% drop in the first. On the other hand, the industrial sector showed weak growth (Q1: +4.3% qoq; Q2: +0.7% qoq), in the wake of slower construction activity. Compared to the same quarter last year, GDP grew 2.8% in the second quarter, which was almost half the 5.0% expansion witnessed in the first. The Bundesbank expects economic activity to grow 3.1% this year and 1.8% in 2012.
Author: Ricardo Aceves, Senior Economist