German “sluggishness” to last until second quarter, Bundesbank says
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The recent slowdown in the German economy is likely to persist over the first quarter of 2012, according to the Deutsche Bundesbank.
Last week, German statistical office Destatis reported that the eurozone’s largest economy contracted by 0.2% in the last three months of 2011, when compared with the quarter before.
The slowdown was attributed to a weaker foreign trade balance and falling levels of domestic demand. Capital formation, especially within construction, was the only positive contribution to growth.
In its monthly report on Germany’s economic situation, the Bundesbank says: “The economic dip, which had been on the horizon for some months, was triggered by the slowdown in global economic growth combined with strains on the euro area’s real economy.”
The near-term decline in business investment is “widely regarded as being temporary in nature”, the central bank adds. It predicts that businesses will stick to their investment plans over the medium and longer term despite the recent declines in demand.
Furthermore, consumer spending is likely to rebound as inflation moderates and this improved sentiment may act as a catalyst for housing construction.
The Bundesbank also points out that the risks stemming from the eurozone debt crisis remain in place and says external factors are likely to hold back growth in the opening quarter of 2012.
“From the second quarter onwards, cyclical stimuli could gain the upper hand, however,” the report says.
“The assumption underlying the Bundesbank’s economic forecast in December of a fairly rapid resumption of growth looks more likely to materialise at the present juncture.”
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