Germany: Economy powers ahead
May 24, 2011
In the first quarter, GDP expanded a seasonally and working day adjusted 1.5% over the previous quarter, which was well above the 0.4% increase observed in the fourth quarter. The expansion, which represented the fastest pace since the second quarter of 2010, confirmed the advance estimate released on 13 May and overshot analysts' expectations of a 0.9% rise. A year-on-year comparison shows that GDP grew 5.2% in the first quarter, faster than the 3.8% expansion witnessed in the fourth quarter. The acceleration over the previous quarter mainly reflected strong growth in domestic demand, owing to a rebound in gross fixed investment, which bounced back from a 0.1% contraction in the fourth quarter to a 5.0% expansion. In addition, total consumption remained resilient, as government consumption rose 1.3% in the first quarter, contrasting a 0.2% fall in the previous quarter. Private consumption increased a modest 0.4% over the previous quarter, slightly below the 0.6% increase observed in the previous quarter. In addition, exports of goods and services grew 2.3% in the first quarter, faster than the 1.8% increase observed in the fourth quarter. In the same vein, imports accelerated from a 0.8% expansion in the final quarter of 2010 to a 1.5% increase in the first quarter. As a result, the net contribution to overall growth from the external sector in the first quarter matched the previous quarter's 0.5 percentage point contribution. At the sector level, the first quarter result reflected strong growth in the industrial sector (Q4: +2.7% quarter-on-quarter; Q1: +4.8% qoq), which benefited from buoyant construction activity. The services sector improved from a flat reading observed in the fourth quarter to a 0.7% expansion in the first quarter. Owing to the country's rapid economic recovery, the government recently revised its growth estimates for this year and now expects the economy to expand 2.6%, up from its previous 2.3% estimate. For 2012, the government anticipates the economy to grow 1.8%, which remained unchanged from its previous forecast. Meanwhile, the Bundesbank, which has recently welcomed Jens Weidmann as President, expects economic activity will grow 2.0% this year and 1.5% in 2012. In a recent statement, President Jens Weidmann said that the first quarter GDP growth figures confirm the Bank's view that the economy remains on a solid growth path and that has recovered faster than initially expected.
Author: Ricardo Aceves, Senior Economist