Germany GDP growth forecast Q1 2012

World Economic outlook - Germany GDP growth forecast Q1 2012 : According to a preliminary estimate, the German economy renewed with growth in Q1 2012. Up by 0.5% q/q (after -0.2% q/q in Q4 2011), GDP was up by 1.2% year-on-year. Capital formation fell, but the contribution from foreign trade to GDP growth was positive in line with an increase in exports, in contrast to imports. In addition, domestic consumption rose.

According to the preliminary estimate of the Federal statistical office, Germany avoided a recession thanks to a rise of 0.5% q/q of GDP in Q1 2012. This increase came after a decrease of 0.2% q/q in Q4 2011, the first since Q1 2009. The carry-over of GDP for 2012 was 0.7% in Q1 2012.

Moreover, GDP, now 1% above its previous peak of Q1 2008, was up by 1.2% year-on-year (price and calendar-adjusted figures).

Detailed national accounts will be published on 24 May only, but according to the Federal statistical office, capital formation fell. Indeed investment in construction probably suffered from the cold weather in February after having risen at the end of 2011. Moreover firm managers probably adopted a wait-and-see attitude. By contrast, the contribution from foreign trade to GDP growth was positive in line with an increase in exports, in contrast to imports. The German economy was penalized by the crisis in eurozone but benefited from the better health from its non-eurozone partners. In addition, domestic consumption rose. Indeed the very low unemployment rate, at its lowest level in twenty years (6.8% in April), probably underpinned private consumption.

GDP growth may be weak in Q2 2012 and its pace of increase should moderately accelerate in the following quarters. Exports and business confidence should be supported by demand from non- eurozone countries (60% of total exports of goods). In addition, the level of the unemployment rate should underpin private consumption in the coming quarters. But the German economy, whose exports account for around 50% of the GDP, should remain affected by the weakness of demand from eurozone countries. Likewise, the expectations IFO index, stable at a high level, points to an only slight acceleration of the growth pace in the coming months. Indeed, in April, the IFO expectations index remained unchanged after having increased for five months in a row (at 102.7 in April).

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