Wednesday, August 26, 2009
BERLIN: Germany exited recession in the second quarter despite a massive drop in inventories and restocking by firms could spur the economy to faster growth. Federal Statistics Office data confirmed on Tuesday that gross domestic product (GDP) grew by 0.3 percent in April-June period, as net trade and private consumption offset the reduction in firms' inventories.
The data ended four straight quarters of contraction, and could offer support for Chancellor Angela Merkel's ruling coalition as a federal election approaches on September 27. Having overcome its deepest slump since World War Two, analysts believe the German economy should rally as companies ramp up production and rebuild their depleted stocks.
"The big decline in inventories suggests that these need to be built up again and that production will get a boost," said Juergen Michels, an economist at Citigroup in London. "The recovery has a relatively solid foundation." Government stimulus measures, such as a subsidy for scrapping old cars in exchange for newer, more environmentally friendly models, were seen by many as a key driver of growth in the April-June period.
"Despite today's positive numbers, the German economy is still on a drip, getting infusions from policymakers," said Carsten Brzeski, an analyst at ING Financial Markets. "The coming weeks and months look good but some doubts remain whether the economy can already stand on its own feet." The figures showed that adjusted for working days, German GDP contracted by 5.9 percent on the year in the second quarter, confirming preliminary estimates from August 13.
In the first quarter, it shrank by 6.7 percent. Many analysts believe job losses in Germany will accelerate in the autumn as the effects of government support for the labour market - notably incentives for firms to put workers on shortened hours rather than fire them - wear off.
In a breakdown of the data, the Office said net trade added 1.6 percentage points to GDP as a sharp drop in imports outpaced a decline in exports. Private consumption added 0.4 points and a liquidation in inventories subtracted 1.9 points. Since Germany reunified in 1990, inventories had only once hit GDP harder, an Office spokesman said.
Then, in the last quarter of 2006, the blip was caused by statistical factors, and did not properly reflect the state of the economy at the time, he added. Latest indicators, such as the Ifo institute's gauge of business sentiment, have risen, suggesting the recovery is gaining strength.
The data ended four straight quarters of contraction, and could offer support for Chancellor Angela Merkel's ruling coalition as a federal election approaches on September 27. Having overcome its deepest slump since World War Two, analysts believe the German economy should rally as companies ramp up production and rebuild their depleted stocks.
"The big decline in inventories suggests that these need to be built up again and that production will get a boost," said Juergen Michels, an economist at Citigroup in London. "The recovery has a relatively solid foundation." Government stimulus measures, such as a subsidy for scrapping old cars in exchange for newer, more environmentally friendly models, were seen by many as a key driver of growth in the April-June period.
"Despite today's positive numbers, the German economy is still on a drip, getting infusions from policymakers," said Carsten Brzeski, an analyst at ING Financial Markets. "The coming weeks and months look good but some doubts remain whether the economy can already stand on its own feet." The figures showed that adjusted for working days, German GDP contracted by 5.9 percent on the year in the second quarter, confirming preliminary estimates from August 13.
In the first quarter, it shrank by 6.7 percent. Many analysts believe job losses in Germany will accelerate in the autumn as the effects of government support for the labour market - notably incentives for firms to put workers on shortened hours rather than fire them - wear off.
In a breakdown of the data, the Office said net trade added 1.6 percentage points to GDP as a sharp drop in imports outpaced a decline in exports. Private consumption added 0.4 points and a liquidation in inventories subtracted 1.9 points. Since Germany reunified in 1990, inventories had only once hit GDP harder, an Office spokesman said.
Then, in the last quarter of 2006, the blip was caused by statistical factors, and did not properly reflect the state of the economy at the time, he added. Latest indicators, such as the Ifo institute's gauge of business sentiment, have risen, suggesting the recovery is gaining strength.
(Reuters)
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Anonymous
August 26, 2009 at 10:42 AM
Wow, this is very interesting, does it mean all of us are getting out of recession...?