German economy matures: mini-plus at the start of the year

German economy matures: mini-plus at the start of the year

It is almost solely thanks to the rising propensity to consume among private households that gross domestic product (gdp) nevertheless grew slightly by 0.1 percent in the first quarter of 2013 compared with the previous quarter, adjusted for price, seasonal and calendar effects, as the federal statistical office announced in wiesbaden on wednesday.

However, experts had expected an increase of 0.3 percent. But after the weak end to 2012, the german economy is only slowly picking up again. Economists at several banks therefore lowered their forecasts for the year as a whole – even though the second quarter was likely to be better than the first quarter.

The weak growth at the beginning of the year was also caused by the extremely wintry weather, the statisticians emphasized.

Economist christian schulz of berenberg bank also emphasized: "a large part of the deleveraging can certainly be attributed to the long, hard winter, which put the brakes on construction activity and parts of industrial production."

Commerzbank's chief economist jorg kramer estimates that the cold march weather reduced the GDP growth rate in the first quarter by up to 0.2 percentage points: "in the second quarter, the german economy was allowed to grow more strongly than in the first quarter, because the construction industry will make up for the weather-related shortfall."
 

On wednesday, the statistics office also corrected the figures from the already weak final quarter of 2012 downward by a further 0.1 percentage points. According to the new calculations, the german economy contracted by a strong 0.7 percent at the end of the year. For 2012 as a whole, statisticians confirmed a GDP increase of 0.7 percent.

From january to march, positive impetus came almost exclusively from private households. After a decline at the end of 2012, they increased their consumer spending again at the beginning of the year, the statisticians reported. Schulz predicted that german growth for the year as a whole would also depend to a large extent on private consumption.

The negative trend in investment continued at the beginning of the year: companies are putting investments on hold because they continue to be unsettled by the european sovereign debt crisis. "The crisis is receding from the minds of businesses more slowly than previously thought," kramer said.

Unicredit economist andreas rees is convinced, however, that investment will also pick up again in the second quarter: "fears of a breakup of the euro zone are clearly subsiding."

Businesses' reluctance to invest usually hits mechanical and plant engineering particularly hard. The german key industry had recently reported a drop in incoming orders, with domestic business in particular disappearing: "this explains (…) also with the uncertainty of the investors", said the chief economist of the association of mechanical engineering companies, ralph wiechers.

Exports were also unable to boost the economy at the beginning of the year: although significantly fewer goods were imported than in the final quarter of 2012, exports were also sluggish. The crisis in the euro zone is largely responsible for the weak foreign economy, emphasized gustav horn of the institute for macroeconomics (IMK): "it is becoming increasingly clear that germany cannot escape this crisis. As a result, the best that can be expected for 2013 is upscale stagnation."

Year-on-year, price-adjusted GDP fell by 0.2 percent in the first quarter, adjusted for calendar effects. Economists had a growth of 0.2 percent expected.

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