The message in today’s numbers on German GDP is very clear: Europe’s largest economy is by no means immune to the euro crisis despite very low interest rates and a seemingly robust labour market.
The data: German GDP increased by just 0.1% in Q1, after a decline of 0.7% in Q4 of 2012 (revised down from -0.6%). And actually, it was not +0.1% in Q1 but just +0.06%, very close to zero in other words. We had pencilled in 0.2%, consensus was 0.3%. Detailed numbers are not yet available but the Federal Statistics Office (Press release on German GDP in Q1/2013) indicated that only private consumption increased whereas capital spending, exports and imports decreased again. Foreign trade as a whole was more or less neutral for growth.
The unusually cold winter certainly played a role in depressing construction output. However, that doesn’t explain all the weakness as construction investment is only 9% of GDP. Most worrisome for me – also in terms of the outlook for employment – is the new decline in spending for machinery and equipment, the sixth quarterly decline in a row. And falling imports are certainly bad news for Germany’s European neighbors. Are we moving closer to a fiscal stimulus given that slow growth will now certalinly be an issue in the election campaign? I don’t think so.
Our forecast for GDP growth in 2013 stands at 0.7% – and that looks too optimistic right now. With Q4/2012 revised down, Q1 slightly weaker than expected and sentiment indicators not pointing to a strong rebound – if any – in Q2, we will revise down that forecast shortly. And also the forecast for the Euro area.
Nordea