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German economy stalls in fourth quarter of 2009

Text by News Wires

Latest update : 2010-02-12

Economic growth in Europe's largest economy stalled in the last three months of 2009 following only modest growth earlier in the year. France's economy grew by 0.6% in the same period.

REUTERS - German gross domestic product showed no growth in the final quarter of last year, official data showed on Friday, leaving Europe's largest economy on a weak footing going into 2010.

GDP was unchanged quarter-on-quarter, preliminary data from the Federal Statistics Office showed, undershooting analysts' expectations for a 0.2 percent rise.

The stall followed a confirmed growth rate of 0.7 percent in the third quarter, and reflected weak investment and consumption offsetting a rise in German exports, the Office said.

"The figures for the fourth quarter are disappointing but don't signal the end of the recovery," said Simon Junker from Commerzbank.

Germany, which is heavily dependent on foreign trade for growth, was hit especially hard by the global crisis last year, when the economy shrank by a record 5 percent in what was its deepest recession since World War Two.

Recent data show 2009 ended in disappointment, but suggest better times lie ahead for Germany's economy.

Industrial output fell sharply in December, data showed last week, with that data following news that German manufacturing orders fell 2.3 percent in the same month, hit by a drop in foreign demand for goods.

Economists expect private consumption to lend little if any support to the recovery this year, with an expected rise in unemployment sapping households' willingness to spend. German consumer sentiment eased going into February.

But exports rose by 3.0 percent on the month in December, pushing foreign demand above the year-ago level for the first time in 14 months and easing concerns about economic recovery.

Year-on-year, the economy shrank by 1.7 percent in the fourth quarter, the GDP data showed, following a 4.7-percent drop in the July-September period.

Economists had expected the economy to contract by 2.2 percent on the year in the fourth quarter.

The government expects the economy to grow by 1.4 percent this year, driven by a projected 5.1 percent rise in exports. However, Economy Minister Rainer Bruederle said last Friday that the country's economic recovery was not yet self-sustaining.

He has also said growth in the first quarter of 2010 could be near zero.

"The first quarter will probably turn out weak too as the record-breaking cold weather, which is a burden to construction in particular, is dragging on a long time," said Gerd Hassel, economist at BHF-Bank. "We no longer have a slump, but rather a very weak recovery."

Date created : 2010-02-12

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