Declining Domestic Demand Undermines German Growth

Germany's economy grew by 0.4 percent in the first three months of 2004, according to the federal statistics office. The increase is solely the result of strong exports and a continuing high demand for German goods abroad while domestic demand declined in the first part of the year, the data showed on Tuesday. High unemployment and uncertainty over government reform plans as well as rocketing oil prices contributed to a decline in consumer spending within Germany, the statistics office reported. In fact, domestic demand contracted by 0.4 percent compared to the previous three months. Germany is the only euro zone country where household spending dropped consistently for two years. Analysts say the low private consumption is Germany's Achilles' heel and the main deterrent to higher economic growth.