Germany: Economy expands despite Eurozone jitters
May 24, 2013
In the first quarter, GDP increased a seasonally adjusted 0.1% over the previous period, confirming the flash estimate released on 15 May. The print contrasted the revised 0.7% decline recorded in the fourth quarter, but came in below market expectations, which saw GDP growing 0.3%. Compared to the same period last year, GDP declined 1.4% in Q1, which was below the flat reading observed in Q4.
The slight expansion in the first quarter was mainly driven by strong growth in private consumption, which swung from a 0.3% drop in Q4 to a 0.8% expansion in Q1. Government spending, on the other hand, deteriorated and fell 0.1% in the first three-month period of this year (Q4 2012: +0.1% quarter-on-quarter). Meanwhile, gross fixed investment contracted 1.5% over the previous period, a deterioration over the 1.1% decline registered in the fourth quarter.
The external side of the economy remains sluggish, as Germany's trading partners in the Eurozone continue to show weak demand. Exports of goods and services contracted in Q1 (-1.8%), albeit less sharply than the 2.4% decline observed in Q4. On the other hand, import growth deteriorated from a 1.3% drop in Q4 to a 2.1% contraction in Q1. As a result, the net contribution from the external sector to overall economic growth was zero in the first quarter, which, nonetheless, marked an improvement compared to the 0.6 percentage-point detraction seen in the final quarter of 2012.
The government expects the economy to grow 0.5% this year. For 2014, the government sees economic growth accelerating to 1.6%. FocusEconomics Consensus Forecasts panellists are more optimistic than the official estimates and expect economic activity to expand 0.6% in 2013, which is down 0.1 percentage points from last month's projection. For 2014, the panel forecasts GDP to accelerate to 1.7%
Author: Ricardo Aceves, Senior Economist