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german economy
According to latest official figures, the German economy slowed by more than expected in Q1 2015, growing by just 0.3%.
That compares with growth of 0.7% in Q4 2015, and was below analysts’ estimates of 0.5%.
Meanwhile, the French economy grew at its fastest rate in nearly two years, expanding by 0.6% in Q1 2015.
The growth figure is the strongest since Q2 2013, when France’s economy expanded by 0.7%.
Last month, INSEE said French consumer spending grew by 1.6% in Q1 2015, boosted by lower oil prices and a weaker euro.
French industrial production grew at its fastest pace for four years in the first quarter, INSEE added.
Despite private consumption and investment in construction and industrial equipment rising. Germany saw its exports fall which held economic growth back.
The German Federal Statistics Office also released inflation data which showed consumer prices rose by 0.5% in the year to April, up from 0.3% in March.
The figure was a marginal upward revision from the first estimate of 0.4%.
Inflation in German, as in the rest of the eurozone, remains stubbornly below the European Central Bank’s (ECB) target of just below 2%. The bank launched a €60 billion monthly bond buying program in March to try to stimulate the region and avoid deflation.
Italy’s economy grew slightly more than expected in the first quarter, fuelling hopes of a recovery.
The economy expanded by 0.3% in Q1 2015 having been flat in Q4 2014 and was flat on an annual basis official figures showed, beating analysts’ forecasts for 0.2% growth.
It is the first time the Italian economy has grown since Q3 2011.
An estimate of economic growth across the whole of the eurozone is due later.
Eurozone has emerged from recession after a record 18 months of economic contraction.
According to the Eurostat agency, eurozone’s GDP grew by 0.3% in the second quarter of 2013, slightly ahead of forecasts.
The growth was widely expected after the German economy rose 0.7% between April and June.
However, the overall figure masks the mixed economic fortunes among the countries that make up the 17-country eurozone area.
Germany and France both posted stronger-than-expected growth, expanding 0.7% and 0.5% respectively.
Portugal, among the smallest and the weakest eurozone economies, showed the fastest growth, at 1.1%.
Eurozone has emerged from recession after a record 18 months of economic contraction
The country was one of three that had to take a multi-billion-euro bailout.
But Spain, which had to seek outside support for its struggling banking sector, saw its economic output fall by 0.1% on the quarter.
Italy and the Netherlands both saw output drop by 0.2%.
European Commission Vice-President Olli Rehn said the figures suggested the European economy was gradually gaining momentum, but added there was no room for complacency.
“There are still substantial obstacles to overcome: the growth figures remain low and the tentative signs of growth are still fragile,” he said.
“A number of member states still have unacceptably high unemployment rates; the implementation of essential, but difficult reforms across the EU is still in its early stages. So there is still a very long way to go.”
Analysts from Capital Economics said: “The return to modest rates of economic growth in the eurozone as a whole won’t address the deep-seated economic and fiscal problems of the peripheral countries.”
The figures reaffirm Germany’s position as the powerhouse behind the eurozone.
Germany narrowly avoided recession earlier this year, but GDP in the second quarter of 2013 was driven up by demand from both consumers and businesses.
The improvement comes just weeks before a federal election that will see Chancellor Angela Merkel stand for a third term in office.
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The German economy slowed to “near stagnation” in March 2013, while France’s recorded its biggest contraction for four years, according to a Markit survey.
The Markit composite purchasing managers’ index (PMI), which measures both the manufacturing and services sectors, declined to 50.6 in Germany last month, from 53.3 in February.
Any figure above 50 indicates growth.
France’s reading fell to 41.9 points, its worst since March 2009.
For the eurozone as a whole, the index fell to 46.5 from 47.9 in February.
The Markit composite PMI, which measures both the manufacturing and services sectors, declined to 50.6 in Germany last month, from 53.3 in February
Chris Williamson, chief economist at Markit, said the latest data painted a gloomy picture.
“The [eurozone] recession is deepening once again as businesses report that they have become increasingly worried about the region’s debt crisis and political instability,” Chris Williamson said.
“The unresolved election in Italy was commonly cited as a key factor clouding the economic outlook in March, and the botched bail-out of Cyprus could well filter through to a further worsening of business sentiment across the region in April.”
Chris Williamson added that the weak showing from Germany “suggests that the only source of bright light in an otherwise gloomy region has once again begun to fade”.
Germany’s index reading was the worst in the country for three months.
Germany’s economy grew by 0.7 percent in 2012, a sharp slowdown on the previous year
Germany’s economy grew by 0.7% in 2012, a sharp slowdown on the previous year, preliminary figures show.
The figure was well below the 3% growth seen in 2011 and suggests the economy contracted in the fourth quarter.
“In 2012, the German economy proved to be resistant in a difficult economic environment and withstood the European recession,” the federal statistics office Destatis said.
Some analysts believe the German economy will enter recession itself.
Destatis said economic activity “slowed down considerably” in the second half of the year, and particularly in the final quarter.
“The full-year growth figure [of 0.7%] implies a contraction of around half a percentage point in the fourth quarter,” the office’s top statistician Norbert Raeth said.
Last month, Germany’s central bank, the Bundesbank, cut its growth forecast for this year to 0.4% and warned that the economy may have contracted in the final three months of 2012, and may do so again in first quarter of 2013.
The eurozone economy as a whole is already in recession, having contracted in both in the third and fourth quarters of last year.
For 2012 as a whole, Destatis said foreign trade was “very robust”, with exports up 4.1% on 2011. Imports grew by 2.3%. The positive trade balance was “once again the main driving force for economic growth in Germany”.
Household expenditure increased by 0.8%, while government spending was up 1%.
The figures also showed that while the service sector of the economy expanded, industry and construction contracted.
Destatis will publish official fourth-quarter growth figures on February 14.
German economy grew by 0.3% in the second quarter of 2012, helped by exports and domestic consumption.
Earlier, France announced its economy had recorded zero growth in the period, which was better than had been expected.
The French economy had also posted zero growth in the previous two quarters.
Official gross domestic product (GDP) figures from the whole of the eurozone are due out from the statistics agency Eurostat later in the day.
German economy grew by 0.3 percent in the second quarter of 2012, helped by exports and domestic consumption
GDP measures the total amount of goods and services produced by an economy.
German growth was slower than the 0.5% recorded for the first three months of the year, but is still expected to be one of the strongest figures for the eurozone.
“Germany has asserted itself thanks to growing exports to countries outside the eurozone,” said Christian Schulz at Berenberg Bank.
“It’s hardly a surprise that consumption has increased due to low unemployment, rising wages and a low rate of inflation.”
Despite growth in Europe’s largest economy, GDP for the whole eurozone is expected to have shrunk.
“We do not think that Germany on its own can keep the entire eurozone afloat,” said Aline Schuiling at ABN Amro.
“Despite the positive growth number for Germany, we expect total eurozone GDP to have contracted by around 0.4% as severe fiscal austerity is pulling most economies into recession.”
Moody’s has warned the outlook for Germany’s AAA credit rating is negative, the first step towards a possible downgrade.
Credit ratings agency Moody’s said the country was at risk from the increased likelihood of a Greek exit from the euro and the need to provide more support to Spain.
Concerns are growing that Spain will have to seek a full bailout.
The Netherlands and Luxembourg – both AAA rated economies – were also put on negative watch.
A negative outlook posting from Moody’s, one of a handful of agencies that assess the creditworthiness of borrowers, reflects a higher risk that the actual rating will be cut at some point in the next two years.
France and Austria lost their AAA ratings earlier this year.
Moody’s said there was an increased chance that Greece could leave the eurozone, which “would set off a chain of financial sector shocks”.
It added that policymakers could only contain these shocks at a very high cost.
Representatives from the troika of international lenders are due to arrive in Greece later to assess its progress towards reducing its debts.
They must decide whether Greece is eligible to receive 31.5 billion Euros – the last tranche of a 130 billion euro ($158 billion) aid package agreed in March.
Greece is behind in its plans to cut spending and debt because its economy is shrinking faster than forecast.
Moody's has warned the outlook for Germany's AAA credit rating is negative, the first step towards a possible downgrade
Separately, the German finance minister, Wolfgang Schaeuble, is to meet the Spanish Economy Minister, Luis de Guindos, in Berlin.
The meeting comes a day after Spain’s borrowing costs rose to their highest level since the creation of the euro. Yields on the country’s 10-year bonds remained above 7.5% on Tuesday.
Italy’s 10-year bond yield was also stuck at a high level, with a yield of 6.377%.
Moody’s warned that Germany and other highly-rated countries may have to increase levels of support for countries such as Spain and Italy, who have not asked for a Greek-style bailout but who are struggling with high debt levels.
It said in a statement: “Even if such an event [a Greek exit] is avoided, there is an increasing likelihood that greater collective support for other euro area sovereigns, most notably Spain and Italy, will be required.
“This burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form.”
Jim O Neill, the chairman of Goldman Sachs asset management, said the European Central Bank needed to take radical action.
“If Italy gets into already the kind of pressure that we now see on Spain, there would be contagion into the French markets probably… so the policy makers have got to do something a little bit more decisive in terms of monetary interventions,” he said.
Lena Komileva, the chief economist at the investment research company, Gplus Economics, said she too was worried about problems escalating.
“My concern is that an outright sovereign bailout is such a politically unpopular measure that it might just happen too late, which means that Spain will continue to bleed contagion into the rest of the eurozone for the remaining of the year.
“Italy of course is an open target for contagion, but I’m increasingly concerned about the position of France.”
The downgrades come as worries over the eurozone crisis pushed the yields on Spanish and Italian debt to record euro-era highs, reflecting a weakening of faith in the pair’s financial position.
The German Finance Ministry said the country would remain strong, and said that Moody’s was focusing on short-term risks.
“By means of its solid economic and financial policy, Germany will retain its <<safe haven>> status and continue to play its role as the anchor in the euro zone responsibly,” the ministry said.
Rival agencies, including Standard & Poor’s and Fitch, have Germany on the AAA top rating with a stable outlook, implying they do not currently foresee a weakening of its financial position, although all agencies regularly review their rankings.
George Soros warns European leaders they have a “three-month window” to save the euro.
The billionaire investor said he believed Greece would elect a government willing to abide by loan conditions imposed by the EU in this month’s elections.
But George Soros said the German economy would begin in weaken in the autumn, making it much harder for Chancellor Angela Merkel to provide further support.
He said leaders did not understand “the nature of the crisis”.
George Soros also said that while European leaders were focusing on debt levels, the crisis was “more of a banking problem and a problem of competitiveness”.
George Soros warns European leaders they have a "three-month window" to save the euro
For this reason, he said they had “applied the wrong remedy”.
“You cannot reduce the debt burden by shrinking the economy, only by growing your way out of it,” George Soros added.
George Soros, speaking at a conference in Italy, was referring to the drastic austerity measures that have been implemented across Europe, measures that are now being questioned by a growing number of politicians and commentators.
Without policies to boost growth, which would enable governments to raise revenue to pay down debt, George Soros said time was running out for the euro.
“I expect the Greek public will be sufficiently frightened by the prospect of expulsion from the EU that it will give a narrow majority of seats to a coalition that is ready to abide by the current [bailout] agreement,” he said.
However, this would provide only temporary respite, he warned, as the German public becomes less willing to continue bailing out its weaker European neighbors.
“The crisis is likely to come to a climax in the [autumn]. By that time, the German economy will also be weakening, so that Chancellor Merkel will find it even more difficult than today to persuade the German public to accept any additional European responsibilities.
“That is what creates a three-month window.”
The German economy returns to growth in the first quarter of 2012 with a better-than-expected 0.5% rise in GDP, official figures have shown.
In Q4 2011, the German economy contracted by 0.2%, its first dip since 2009.
Meanwhile, the French economy recorded zero growth in the first quarter, after growth of 0.1% at the end of 2011.
Figures released later on Tuesday are expected to show that the eurozone as a whole has returned to recession.
Data also showed that the Italian economy fell deeper into recession after contracting by 0.8% in the first quarter, slightly worse than analysts had expected. The economy shrank by 0.7% in the previous quarter.
Compared with the same a quarter a year earlier, the German economy grew by 1.7%.
The German economy returns to growth in the first quarter of 2012 with a better-than-expected 0.5 percent rise in GDP
The German statistics agency Destatis said growth was due to a rise in exports and higher domestic consumption.
The return to growth means Germany has avoided a so-called double-dip recession, confounding the predictions of a number of commentators.
In contrast, the French growth figures failed to outperform analysts’ expectations, and the growth figure for the final quarter of last year was revised down to 0.1% from 0.2%.
“There was no good surprise,” said Philippe Waechter at Natixis Asset Management.
“There was weak consumption [and] no investment.”
The French GDP figures come on the day of the inauguration of the new French President Francois Hollande, who has vowed to boost economic growth.
In the run up to the presidential election, in which he ousted Nicolas Sarkozy, he campaigned hard for measures focusing on stimulating the economy alongside the austerity measures that have been adopted across the eurozone.
He will visit German Chancellor Angela Merkel later on Tuesday to make the case for growth.
Francois Hollande believes that growth rather than austerity is the best way for governments to reduce their debts, a view that is being discussed more widely as the eurozone economy continues to struggle and increasing numbers of Europeans voice their anger at austerity.
The eurozone economy contracted by 0.3% in the final quarter of last year, and many analysts believe growth figures published later this morning will show further contraction in the first quarter of this year. If they are correct, the eurozone will be back in recession.
