Germany's economy contracted by 0.2 percent in the fourth quarter on sagging exports and private consumption, data showed on Friday, but analysts said they expected Europe's growth engine to pick up steam again this year.
Investments, particularly in construction, were a bright spot.
The seasonally adjusted data from the Statistics Office confirmed an earlier flash estimate and showed trade and private consumption, respectively, subtracting 0.3 and 0.1 percentage points from Gross Domestic Product.
Exports in particular dropped 0.8 percent in the fourth quarter after growing 2.6 percent in the previous three months.
Economists put this down to weaker demand from the euro zone, which is mired in a sovereign debt crisis.
“The economy was driven into the red by the decline in exports, but this was weaker than expected,” said Berenberg
Bank's Christian Schulz.
“Fewer exports to the euro zone were largely offset by stronger demand from non-EU countries.”
“The fact imports declined only slightly, despite lesser fuel imports due to a milder winter, would suggest that domestic demand is still robust,” he added.
Germany's traditionally export-led economy had grown 0.6 percent in the third quarter, contributing to 3 percent full year growth. Economists now expect the economy to stagnate in the first quarter of 2012, dodging the two quarters of negative growth which define a recession, before recovering from the second quarter on the back of private consumption.
Forward-looking indicators are upbeat. Business sentiment rose to its strongest in seven months in February, a key survey showed on Thursday.
Arnd Schaefer, an economist at WestLB noted that while private consumption shrank 0.2 percent in the last three months of 2011, the underlying trend was positive.
Third quarter data was revised upwards to show consumption growing 1.2 percent versus an originally reported 0.8 percent.
“Private consumption has emerged to be stronger than expected; the third quarter was revised upwards, while the fall at the end of 2011 was relatively small,” he said. “Private consumption should support the economy this year.”
“We expect gross domestic product growth of 0.8 percent in 2012,” Schaefer added.
The data on Friday showed investments supported the economy in the fourth quarter, particularly investments in construction
which rose 1.9 percent, adding 0.2 percentage points to GDP. - Reuters