Singapore Markets closed

Instant View - German economy shrinks 0.6 percent in fourth quarter on weak exports

BERLIN (Reuters) - Germany's economy shrank by 0.6 percent in the final quarter of 2012, its deepest contraction since the height of the global financial crisis in 2009 as exports slowed at the end of the year, seasonally-adjusted data showed on Thursday.

Preliminary Statistics Office data also showed Europe's largest economy still grew on the year, albeit at a meagre 0.1 percent, down from 0.4 percent growth in the third quarter.

"Comparatively weak foreign trade was the decisive factor for the decline in the economic performance at the end of the year: in the final quarter 2012 exports of goods declined significantly more than imports of goods," the Statistics Office said in a statement.

The quarterly decline was a tick deeper than a forecast for 0.5 percent contraction in a Reuters poll of 45 economists and was the lowest since Germany's economy contracted by 4.1 percent in the first quarter of 2009.



"This is a temporary period of weakness in the German economy rather than the beginning of a long period of stagnation or even a recession. The weakening in the global economy was noticeable at the end of the year. Among other countries, big economies like the USA, Japan and France are suffering from that.

"The outlook is very promising. The chances that the economy will return to growth at the beginning of this year are very good. The early indicators are all pointing upwards. The question is how strong the first quarter will be. We expect growth of 0.3 percent but it could be more. In spring and summer we expect growth of 0.5 percent. Companies will probably start investing more again after they held back for a year due to the euro zone debt crisis. The backlog in investments is beginning to clear."


"With increased uncertainty stemming from the euro crisis and the global economic cooling in the second half of the year, the German economy has finally lost its invincibility. Looking ahead, however, there is increasing evidence that the economy should pick up speed again very quickly. Confidence indicators have improved over the last three months and this new optimism is not only wishful thinking. The increase of new orders is again feeding the economy's industrial growth engine. Moreover, the industrial safety net of filling order books and inventory reductions has improved, boding well for industrial production in the months ahead. Finally, if the lower-risk environment continues, record-low interest rates should support an investment rebound, contributing to growth in 2013.

"All in all, even if today's numbers are disappointing, they are no reason to start singing the blues on the German economy. The contraction should be a temporary gaffe rather than a new worrying reality."


"That was a bad fourth quarter. It was down to companies investing less due to uncertainty linked to the debt crisis. It was also, however, due to a weak global economy which put the brakes on German exports. But both these negative factors have fallen into the background. The debt crisis has ebbed significantly and the global economy has turned up. Therefore all the important early indicators for Germany are pointing upwards. I expect noticeable economic growth again in the first quarter."

(Reporting by Annika Breidthardt)