German Recovery Stumbles As Growth Stalls

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Germany's economic recovery ground to a halt in the final quarter of 2009, as weak private consumption and investment offset a spike in exports, figures released by the government showed.

German gross domestic product was flat in the three months through December period, the Federal Statistical Office said on Wednesday, confirming preliminary estimates. The stall in German growth follows two quarters of expansion in Europe's largest economy. National output grew 0.7% in the September quarter.

The statistical office said foreign trade offered the only postive contribution in the fourth quarter, contributing 2 percentage points to growth. This was entirely offset by declines in private and public sector consumption and investment.

Private consumption fell 1%, the same rate of decline as in the previous three months. Government spending dipped 0.6%. Investment in machinery and equipment dropped 1.5% after a 0.8% rise in the previous quarter. Net exports added 2 percentage points to GDP growth, while a reduction in inventories deducted 1.2 percentage points.

"The fourth quarter was distorted sharply downwards by a special calender effect," Commerzbank analyst Simon Junker said. "Growth in the first quarter should come in higher simply as a result of the subsequent countermovement."

Year-on-year, the economy shrank by 1.7% following a 4.7% contraction in the previous quarter, also matching preliminary estimates.

Meanwhile, market research group GfK said today that consumer confidence among Germans is likely to decline going into March, as worries over unemployment weigh on consumers. The forward-looking consumer sentiment indicator, based on a survey of about 2,000 Germans, fell to 3.2 in March from an upwardly revised 3.3 in February. This was better than consensus forecasts for a reading of 3.

All three sub-components in the survey, which refer to February, worsened over the month, GfK said. The gauge of consumers' economic expectations slid to minus 5.6 in February from 1.5 in January, while the income expectations sub-index eased to 12 from 12.5. The sub-index measuring buying propensity of consumers fell to 24.2 from 25.4.

Additionally, data from the Ifo economic think-tank on Tuesday showed business sentiment falling for the first time in close to a year in February, providing more bad news for the economy.

"At first sight, it looks as if the German economy has fallen into hibernation: stagnating growth in the fourth quarter and yesterday's weakening Ifo index," said Carsten Brzeski, economist at ING. "However looks can be deceiving. The underlying trend remains healthy. Demand for German products remains strong and German companies are increasingly becoming more positive about the future," he added.

Germany emerged from recession last summer led by a recovery in its exports - on which it largely relies.

Germany's economic recovery ground to a halt in the final quarter of 2009, as a spike in exports was offset by weak private consumption and investment, figures released by the government show. (Market News Provided by RTTNews)