Details of Germany's first quarter Gross Domestic Product were released today. Total growth in the economy was 1%, the same as the Flash Estimate of two weeks ago. The detailed data show that domestic demand continued to be weak. It declined 0.56% in the first quarter after a similar decline in the fourth quarter of 2004. Consumption declined by 0.18% but gross investment, including inventories and the acquisition less disposal of valuables, declined 2.32%. Fixed investment, alone, was down 1.66% suggesting substantial inventory liquidation.

Exports continued to increase--2.90%--and with a decline--1.36%--in imports, the strength in the foreign sector managed to overcome the weakness in the domestic sector, resulting in the modest 1.0% gain for the whole economy. The quarter-to-quarter percent change in total GDP, along with the quarter-to-quarter change in domestic demand is shown in the first chart.

Among the institutional investors and financial analysts, who participate in the ZEW survey (also released today), the optimists are losing heart. In March of this year the percent balance between those who expected improvement in the economy over the next six months and those who expected a worsening was 36.3% That margin dropped to 20.1% in April and to 13.7% in May. The percent balance between optimists and pessimists is shown in the second chart together with the quarterly change in real GDP.