Bundesbank Predicts Avoiding Recession

The German economy contracted in the final quarter of 2012 by 0.6%, raising fears that the leading Eurozone economy could be heading for recession. Whilst the Eurozone as a whole has been experiencing a recession, Germany has so far avoided it and, indeed, posted full year growth of 0.7%. This compares poorly with the 2011 growth figure of 3%, of course.

The German central bank, the Bundesbank, has taken a bullish stance on the nation’s prospects for avoiding recession in Q1 2013 in its monthly report for February which also predicts a gradual increase in economic activity over the course of the year. The report notes: “As it currently looks, a plus in economic output can be expected in the first quarter of this year. For the rest of this year, the economy is expected to pick up gradually, even if the external economic environment will provide no trigger for a sharp surge in demand." The muted optimism is confirmed by a survey of German business confidence for January which returned the best reading since before the crisis hit.

As a whole, the Eurozone contracted by 0.6% in the final quarter of last year and that was the worst quarterly decline seen since the height of the global financial crisis in 2009. On a broader canvas, the Organisation for Economic Cooperation and Development (OECD) has reported that OECD economies contracted by 0.2% in the final quarter of 2012. Again, this is the worst performance seen since 2009. The OECD block is made up of major economies such as the Eurozone, Japan, the USA and UK. Japan and the UK saw contraction in Q4 whilst an initial reading of the US economy saw it as flat.