Vanishing Exports German, Euro-Zone Economies Report Massive Shrinkage
The global economic crisis depressed GDP in Germany and the entire euro zone during the first quarter of 2009. Berlin's preliminary 3.8 percent drop in GDP is even worse than economists predicted.
With demands for exports dropping, the German economy was hit hard during the first quarter of 2009, with gross domestic product shrinking by 3.8 percent compared to the previous quarter. The decline was the biggest quarter-on-quarter drop since Germany began collecting GDP data in 1970 -- but some economists nevertheless expressed cautious optimism.
A steam turbine factory in the eastern German city of Görlitz: Exports are getting hit particularly hard by the economic crisis.
Still, the fall was more precipitous than expected. Forty-five economists polled by the news agency Reuters prior to the data's release had predicted a drop of only 3 percent. GDP is considered the most important measure of a country's economic health because it takes into account both products and services.
"The collapse has come as a result of a drop in exports and investments," a Federal Statistical Office spokesperson said after the release of the data on Friday. At the same time, private and state spending increased slightly during the period, preventing an even worse outcome. The government is expected to present its official figures on May 26.
The shrinkage represented the fourth consecutive quarterly loss for the German economy. During the final quarter of 2008, Europe's biggest economy shrank by 2.2 percent and it contracted by 0.5 percent in each of the two previous quarters.
The German government and leading economics institutions are forecasting a 6 percent drop in GDP in 2009 in the country, the steepest since the founding of the Federal Republic after World War II. A decline in demand for high value goods has put intense pressure on the German economy. Germany is the world's leading exporter.
Year-on-year data showed a drop of 6.7 percent compared to the first quarter of 2008. And if the data is adjusted for working days, it shows that German GDP actually contracted by 6.9 percent during the first quarter. Economists had only expected a 6.2 percent year-on-year drop.
Is the Worst Behind Germany?
Despite the unexpectedly bad figures, some economists expressed a slightly optimistic tone on Friday, saying the German economy may already have bottomed out. For the coming quarters, they expect a smaller economic contraction and some suggest positive economic growth could happen by year's end.
Meanwhile, the euro zone, the 16 countries that share Europe's common currency, on Friday reported a first-quarter drop in GDP of 2.5 percent. Economic output in the euro zone has now fallen for four consecutive quarters, with Europe falling deep into a recession. As in Germany, the decline was deeper than the 2 percent expected by economists. Comparing year-on-year data, the euro zone contracted by 4.6 percent.
Across the European Union, including countries that have not adopted the euro, the economy shrank by 2.5 percent in the first quarter and 4.4 percent year-on-year. The economies hardest hit by the recession are Latvia and Slovakia, which each contracted by 11.2 percent during the first quarter.
Italy on Friday reported its greatest quarterly economic contraction in 29 years, with quarter-on-quarter GDP shrinkage of 2.4 percent. The country hasn't seen a drop that big since it began collecting GDP data in 1980, and economists had only been predicting a decline of 1.8 percent.
Compared to the same quarter in the previous year, Italian GDP fell by 5.9 percent. With the first-quarter data now in, the euro zone's third-biggest economy has now seen four consecutive quarters of GDP shrinkage.
France, meanwhile, appears to have slowed its economic slide. Compared to the previous quarter, first-quarter contraction was only 1.2 percent. During the last quarter of 2008, France also experienced negative economic growth of 1.5 percent. And like Italy and Germany, France has reported four straight quarters of economic decline. For 2009, French Economics Minister Christine Lagarde is expecting a contraction of 3 percent.
On Thursday, Spain also released its latest figures showing a first-quarter shrinkage of 1.8 percent. Analysts had been forcasting a drop of 1 percent. On a year-on-year basis, GDP there fell by 2.9 percent.
And Britain, where the financial sector has been badly hit by the global economic crisis, GDP shrank by 1.9 percent in the first quarter -- a bigger contraction than the 1.6 percent drop experienced in the previous quarter.
dsl -- with wires