German recession deepens in fourth quarter: data
The German economy contracted at its fastest rate since reunification of the country in 1990 in the last quarter of 2008 due to falling demand for exports and shrinking business investment.business Updated: Feb 13, 2009 14:31 IST
The German economy contracted at its fastest rate since reunification of the country in 1990 in the last quarter of 2008 due to falling demand for exports and shrinking business investment, data showed on Friday.
"That was the largest quarter-on-quarter decrease" since German reunification in 1990, the Destatis national statistics service said, commenting on the bigger than expected drop.
The bigger than expected drop was mainly the result of a collapse in exports, the chief source of growth for the German economy, which looks to be heading for its worst economic downturn since World War II.
The "decrease in German exports was much larger than that of imports," Destatis noted.
Analysts polled by Dow Jones Newswires had expected the economy to contract by 1.8 per cent from the previous three month period.
Economic activity had already shrunk by 0.5 per cent in the second and third quarters of the year, the technical definition of recession.
Both capital investment and trade were major factors in the fourth quarter decrease, but consumption was down as well, in particular that by households, the statistics service said.
Consumers were concerned by a slowing rate of employment, even though for the entire year Germany created 422,000 new jobs, an increase of 1.0 per cent on an annual basis.
Quarterly employment gains "decreased markedly since the beginning of 2008" however, Destatis said.
It will release more detailed results on February 25.
For 2009, the government has already warned it expects the economy to contract even more, by around 2.25 per cent, and that half a million people could lose their jobs.
Germany's economy, which accounts for about a third of eurozone output, has been slammed by the global economic slowdown, and the jobless rate is expected to reach 8.4 per cent this year from 7.8 per cent in 2008, the government said in January.
Chancellor Angela Merkel's uneasy left right "grand coalition" has put together a 50 billion euro (65-billion-dollar) stimulus package, the biggest in modern German history, to soften the blow.
It includes a huge increase in spending on roads, railways, hospitals and schools. Other elements include cuts in tax and social security contributions, as well as incentives for consumers to buy new "greener" cars to boost Germany's ailing auto sector.