German gross domestic product (GDP) contracted in the second quarter of this year for the first time since 2004, weighed down by weaker private consumption and investment, official data showed today.
The Federal Statistics Office said Europe's largest economy contracted by 0.5 per cent quarter on quarter in the April-June period, in line with a preliminary estimate published earlier in August. On an annual basis, growth totalled 3.1 per cent.
"We could fall into stagnation. A recession can also not be ruled out," said Jens-Oliver Niklasch, analyst at LBBW.
A number of leading economists have said the economy could contract again in the third quarter - a scenario that would put the economy in recession. A recession is commonly defined as two or more consecutive quarters of negative growth.
The second-quarter contraction was led by a drop in private consumption, which shaved 0.4 percentage points from the quarterly growth total, the office said.
Gross capital investment also subtracted 0.4 percentage points from GDP growth. Stock-building by firms trimmed 0.2 percentage points from GDP growth and construction activity cut 0.4 points.
Trade, a major driver of growth in recent years, was a boost to first-quarter growth to the tune of 0.4 percentage points, as imports fell by more than exports. Government spending added 0.1 percentage points.
Corporate Germany is braced for tough economic conditions. Late last month, industrial group Siemens posted stronger-than-expected results for the quarter ended June 30th but said it expected a slowdown ahead.
Chemicals giant BASF struck a similar tone.
After reporting a 19 per cent rise in quarterly operating profit late last month, BASF Chief Executive Juergen Hambrecht said: "The road ahead is stonier and steeper, and the competition is tougher", though he added he remained confident.
Reuters