Europe’s Powerhouse Slows

One thing that recent times have demonstrated is that most longer-term economic projections in the aftermath of the worst global recession since the Great Depression is that they are about as reliable as reading the tea leaves. Now is the reporting time for preliminary growth or contraction data for Q4 and 2012 as a whole.

The German economy is the powerhouse of the European Union and the nation is the second leading exporter of good to the rest of the world after China. In 2011, the whole year GDP figure came in at 3%, but preliminary data for 2012 suggests that this has slowed to just 0.7% - but at least the economy is still growing. As Destatis, the German statistical agency noted: “In 2012, the German economy proved to be resistant in a difficult economic environment and withstood the European recession”.

Analysts expect that the German economy contracted in the final quarter of 2012 and some fear that it may enter a recession in Q1 of 2013. Destatis suggested that the whole year figure implied that the economy could have contracted by about 0.5% in Q4. They pointed out that economic activity had slowed down considerably in the second half of the year; particularly in Q4. Official figures are due for release on Valentine’s Day. However, the news was not all bleak. The agency reported that German exports showed a 4.1% increase over the 2011 level. Imports increased by 2.3% giving the German economy a healthy trade balance since the value of exports (not the percentage) outstripped the cost of imports. Government spending rose by 1% and encouragingly, household expenditure was also up on 2011 by 0.8%.