Business confidence rose in May, topping analysts’ estimates as Germany informed that it escaped the danger of a recession. Interestingly, despite dropping imports and exports, the Europe’s biggest economy recorded growth in the first quarter due to private consumption.
Danger of recession obviated
On the 24th of May, the German Federal Statistical Office (Destatis) issued its final data on Germany’s gross domestic product for the first quarter ended March, indicating that the Europe’s biggest economy witnessed modest growth of 0.1 percent on a month-on-month basis. In the last quarter of 2012 ended December, Germany saw its economy contract approximately 0.7 percent. Analysts note that the anemic growth in the January-March period was caused by extremely harsh weather conditions and long winter, but they concurrently underline that Germany obviated the danger of recession.
Surprisingly, it was private consumer spending which drove Germany’s growth. According to the released data, private consumption climbed around 0.8 percent. This is quite comforting when compared to public sector spending which dropped by about 0.1 percent in the given period. The findings indicated that investment slumped by approximately 2.4 percent. Moreover, investment in machinery and equipment dropped around 0.6 percent in the first three months of the year on a quarter-on-quarter basis.
Certainly, data on exports and imports were most distressing. According to the official statistical agency, imports plunged by around 2.1 percent while exports slumped roughly 1.8 percent.
Without a doubt data on economy, especially on imports and exports, were indeed disturbing, yet analysts are convinced that the Germany’s economy will speed up, underlining that this anemic growth was almost “accidental” and driven by the adverse weather conditions.
Also on the 24th of May, the Munich-based Info Institute released its report which showed that the business climate index climbed to 105.7 in May from 104.4 recorded in April, topping analysts’ estimates. The findings simply showed that the climate and atmosphere had significantly improved in Germany. Economists at the Info Institute are convinced that Germany will speed up in the ongoing quarter ending June.
What is interesting is the fact that another survey conducted by famous GfK indicated that consumer sentiment climbed to 6.2 in May. Releasing the findings, the institute underlined: “The high level of employment, favorable wage agreements and slowing inflation are buoying sentiment.”
Even though there is a visible recovery, analysts note that it is still a weak one. The fact is that the Germany’s economy has been suffering from the ongoing eurozone crisis and the slowdown in China. It seems that these two main causes of deterioration will continue to affect the Germany’s economy. Yet Germany is still expected to see its economy grow for the rest of the year, however the growth rate will be relatively slow.