Germany: Economic upswing continues at slower pace in Q4
February 24, 2011
The recovery in the German economy continued in the last quarter of 2010, albeit on a weaker footing. GDP expanded a seasonally and calendar adjusted 0.4% over the previous quarter, which was below the 0.7% increase tallied in the third quarter. The expansion represented the slowest pace in 2010 and, despite confirming the previous estimate, fell a notch short of private sector analyst expectations of a 0.5% rise. Compared to the same quarter the year before, GDP grew 4.0% (Q3: +3.9% year-on-year). The slowdown in the final quarter mainly reflected a deterioration in the domestic sector, with domestic demand falling 0.4% in the fourth quarter, owing to a contraction in gross fixed investment (Q3: +1.5% quarter-on-quarter, Q4: -1.1% qoq). In addition, private consumption slowed from a 0.5% expansion in the third quarter to a moderate 0.2% growth in the fourth quarter. Government consumption grew 0.6%, down from the 1.5% increase observed in the third. On the other hand, exports of goods and services maintained a healthy rhythm, growing 2.5% in the fourth quarter (Q3: +2.7% qoq), while imports expanded at a slower pace, increasing 0.9% in the final quarter (Q3: +1.4% qoq). As a result, the net contribution from the external sector to overall economic growth remained unchanged at Q3's 0.7 percentage points. At the sector level, the fourth quarter reading reflected slower growth in the services sector (Q3: +0.9% qoq; Q4: +0.2% qoq), while agriculture grew at the same pace as in the previous quarter (Q4: +0.1% qoq). Only the industrial sector fell over the third quarter, dragged lower by a contraction in construction (Q4: -3.5% qoq). For the full year 2010, the economy posted growth of 3.6%, which marked the fastest pace in over two decades. Meanwhile, Bundesbank President Axel Weber, who leaves office in April, has recently stated that the economy is on the road to grow 2.5% this year, suggesting that the Bank has revised its previous 2.0% growth estimate. Meanwhile, the government expects economic activity to rise 2.3% this year, before moderating to 1.8% in 2012.
Author: Ricardo Aceves, Senior Economist