Germany dodges recession in first quarter of 2012 | Business| Economy and finance news from a German perspective | DW | 24.05.2012
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Germany dodges recession in first quarter of 2012

Official data released by the German Statistical Office show that Europe's biggest economy avoided recession in early 2012. After contracting at the end of 2011, Germany seems set for a robust recovery.

The German Federal Statistics Office (Destatis) has reported that economic activity in the country grew by 0.5 percent in the first three months of 2012, after contracting by 0.2 percent at the end of 2011.

Strong exports and consumer demand, Destatis figures show, helped Europe's economic powerhouse dodge a technical recession, marked by two consecutive quarters of shrinking Gross Domestic Product (GDP).

The rise in German GDP is stronger than predicted by economists, who forecast growth of around 0.2 percent.

"The economy started 2012 with a sensational bang and surpassed with 0.5 percent growth even the most upbeat forecasts," Norbert Irsch, Chief Economist at German KfW bank, told dpa news agency.

Berenberg Bank analyst Christian Schulz told Reuters news agency that demand from emerging countries had sustained the German economy while exports to countries in the eurozone had suffered.

"We expect domestic consumption to remain stable and housing construction to pick up speed. But companies are likely to invest less in view of the euro crisis, meaning that growth may slow down again in the second quarter."

Bucking the trend

German first quarter GDP growth was boosted primarily by a 1.7 percent rise in exports compared with the previous quarter when they fell 1.5 percent, Destatis said.

In addition, consumer spending grew 0.4 percent, while government expenditure edged 0.2 percent higher.

However, gross capital formation - a barometer of investment activity - contracted 3.3 percent in the first quarter, with investment in machinery and equipment down 0.8 percent and construction investment falling by 1.7 percent.

That has led the German Central Bank, the Bundesbank, to warn in its monthly report published Wednesday that the "surprisingly good GDP data" for the first quarter "overstate the current underlying cyclical trend and cannot be extrapolated onto the following quarters."

uhe/mll (dpa, AFP, Reuters)