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Economy in Brief

Jumpin' German GDP
by Robert Brusca August 25, 2009

German GDP’s turnaround reveals its secrets – Germany finalized its GDP and provided details on Q2 GDP performance. GDP rose by 1.3% annualized and compounded Q/Q. Private consumption continued positive in Q2. Public spending on Consumption cooled, rising at a 1.7% a.r. down from its pace of +4.3% in Q1. Gross fixed capital spending made a sharp turn rising at a mild 3% pace after plunging at a rate of -27% in Q1. Housing investment picked up to a 5.8% pace from 1% in Q1. But exports fell subtracting from growth. That was more than offset by the plunge of 19% at annual rate by imports in Q2. On balance domestic demand still contracted in Germany in Q2 on an inventory pullback.

Imports cushion drop in domestic demand - The sharp drop in imports helped to offset the impact of domestic demand weakness on GDP by adding 8.6% to the annual rate of growth as exports cut over two percentage points from GDP growth in Q2. Private consumption alone added 1.7 percentage points to growth. The cut in GDP has a lot do with inventory investment that is still a drag. But that will become a positive in the future.

So far so good - So far the German details on GDP are relatively encouraging. But the outsized drop in imports that boosted growth will not repeat. Meanwhile exports fell in Q2 and they are a key factor in the growth story. Exports do show signs of turning up; at least orders for exports are up. Retail spending in Germany is positive but it has remained weak. So while there are bright spots there are still challenges ahead for German growth.

German GDP
    Consumption Capital
  GDP Private Public G Fix Invst Housing Exports Imports Demand
% change Q/Q; X-M is Q/Q change in Blns of euros
Q2-09 1.3% 2.9% 1.7% 3.1% 5.8% -4.7% -19.0% -5.0%
Q1-09 -13.4% 2.6% 4.3% -27.5% 1.0% -35.8% -19.6% -4.1%
Q4-08 -9.4% -1.7% 2.2% -7.8% -4.0% -28.1% -15.6% -1.5%
Q3-08 -1.3% 1.3% 0.5% 2.4% -1.6% -0.4% 14.2% 4.8%
% change Yr/Yr; X-M is Yr/Yr change in Gap in Blns of euros
Q2-09 -5.9% 1.2% 2.2% -8.3% 0.2% -18.6% -11.0% -1.5%
Q1-09 -6.7% -0.1% 2.5% -11.2% -5.4% -17.5% -7.6% -1.6%
Q4-08 -1.8% -0.3% 2.4% -1.4% -0.1% -6.3% 0.8% 1.7%
Q3-08 0.8% -0.1% 2.3% 2.9% 1.7% 3.4% 5.3% 1.4%
5-Yrs 0.4% 0.6% 1.4% 1.6% 0.7% 2.0% 3.0% 0.7%
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