German gross domestic product contracted by 0.5% in the Q3, putting Europe’s largest economy in recession for the first time in five years, Federal Statistics Office figures showed on Thursday.
The bigger than expected quarter-on-quarter drop in growth, adjusted for seasonal, calendar and price effects, was marked by a negative contribution from foreign trade as exports weakened. This more than offset a rise in private and public consumption. The office also revised up the second-quarter GDP figure to show a contraction of 0.4%, compared with 0.5% previously reported.
The last time the economy shrank for two straight quarters was in the first half of 2003, it said. “If you think today’s numbers are already bad, just wait for the next quarter,” said ING Financial Markets’ Carsten Brzeski. “The headwinds of the financial crisis and the global economic slowdown are blowing right in the face of the German economy.” “So far, there is only dim light at the end of the tunnel. At the earliest, a recovery can be expected in the H2 of 2009.”
The mid-range forecast of 40 economists polled by Reuters last week was for a quarterly contraction of 0.2% in the Q3. “A negative effect on gross domestic product came from foreign trade, with a strong increase in imports and weakening exports,” the Statistics Office said. On the year, German GDP increased by 1.3% in the Q3 after annual growth of 3.3% in the April-June period, the figures showed.
Adjusted for working days, GDP expanded by 0.8% on the year. There was one more working day in the Q3 of 2008 than in the same period in 2007. The GDP data followed a run of weak data on the German economy. Industrial production posted its biggest drop in nearly 14 years in September, when manufacturing orders fell more sharply than at any time since reunification in 1990. In a sign of how even flagship companies are suffering, carmaker Daimler said last month it would shut two big German plants for a month due to a sharp drop in demand.
Auto parts maker Robert Bosch said last week it would shorten the working week for 3,500 workers at a plant in Germany for six months. The office is due to publish a breakdown of the third-quarter GDP figures on Nov. 25. (Reuters)