German economy likely faltered in last quarter

01-13-2010 14:01

It is expected that the German economy faltered in the last quarter of 2009, according to the German Federal Statistics Office, ending the most negative year for the bloc’s wealthiest country, Germany, since the Second World War. Nevertheless, the Bundesbank forecasted last month that the German economy would grow by 1.6% in 2009 en by 1.2% next year.

Gross domestic product (GDP)

Norbert Raeth, economist at the Federal Statistics Office, commented: “The gross domestic product (GDP) continued the level of the preceding quarter.” However, the statistic for the last quarter of 2009 is “enfolded by doubts,” he stated. The gross domestic product contracted by 5% in 2009, which is more than economists had forecasted, while 2008 showed a 1.3% growth.

German economy

The German economy contracted for four consecutive quarters, as it expanded again in the third quarter of last year, as a result of global politicians promising billions to fight the economic slump. The German government is investing €85 billion ($123 billion) to stimulate economic expansion. Furthermore, retail sales in Germany dropped in November, while German investor confidence fell for a third month in December.

Losing pace

Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt, stated: “It’s hard to forecast the developments in 2010, as we first need to determine what caused the unexpected weak data of the fourth quarter. It doesn’t indicate the end of the economic improvement, but the recovery is certainly losing pace.”

Euro – DAX – yield

Europe’s Single Common Currency gained 0.2% versus the Greenback as a result of today’s figures, reaching a level of $1.4507 at 11:22 a.m. in Frankfurt. The benchmark DAX share index rose to 5956.37, 13.37 points up. The yield on the German 10-year benchmark bond increased to 3.33%, 0.2 basis points up.

Remain tough

Metro AG, the 5th largest retailer in the world, stated Tuesday that it forecasts economic circumstances to “remain tough” in 2010. Metro AG’s revenue decreased by 3.4% in the last quarter of 2009.
Exports declined by 14.7% in 2009, while private consumption rose by 0.4% in 2009 as a result of stimulus measures by Angela Merkel’s government.

International Monetary Fund (IMF)

However, the recovering worldwide economy may provide support for foreign sales. The International Monetary Fund (IMF) could increase its 3.1% prediction for international growth in 2010 later this month, according to a statement by IMF’s first deputy managing director John Lipsky on January 6.
The Deutsche Bundesbank, Germany’s central bank, stated in December that the prospects have “improved noticeably,” forecasting the German economy to grow by 1.6% in 2010 and 1.2% in the next year.