German economy feared to have stalled

By Kirsten Grieshaber

Associated Press

Published: Wednesday, Jan. 11 2012 6:35 a.m. MST

Containers are piled up at the harbor on Wednesday, Jan. 11, 2012 in Duisburg, Germany. Germany's economy is expected to have slipped into reverse in the last quarter of 2011 in spite of showing an overall growth for the year of 3 percent, the country's Federal Statistics Office revealed Wednesday.

Frank Augstein, Associated Press

BERLIN — Germany's economy slipped into reverse in the last quarter of 2011 in spite of showing strong overall growth for the year of 3 percent, the country's Federal Statistics Office said Wednesday.

The country's annual growth rate was achieved in spite of the financial crisis in Europe which has other economies such as Greece, Spain and Italy struggling with huge debts and slumping output.

"The German economy again grew robustly in 2011," the statistics office, Destatis, said in a statement.

In 2010, the German economy grew by 3.7 percent after a painful contraction of 5.1 percent in 2009, which was by far its worst showing since World War II.

While the 2011 growth figure was as expected by analysts, the statistics office also said that the German economy likely contracted by 0.25 percent in the last quarter of 2011. The exact figure for fourth quarter growth is due only in mid-February and could be revised.

Joerg Kraemer, the chief economist for Commerzbank, expressed little surprise regarding the slowdown and told German news agency dapd he expected the economy to shrink in the first quarter of 2012 as well. That would put it in a recession, technically defined as two consecutive quarters of economic contraction.

Most recent economic indicators suggest 2012 will be a tough year, both for Germany and the rest of Europe.

"While the German economy grew very strongly in the last two years, this year's growth will be much lower, especially because of the crisis in the eurozone," Ferdinand Fichtner, the head of the DIW economic institute, said in a statement.

Germany's 2011 growth puts it in a small group of strongly performing eurozone countries, along with Finland, Austria, Slovakia, and Luxembourg. France should see more moderate growth of around 1.7 for the year, according to the International Monetary Fund, while output stagnates amid high unemployment in Spain and Italy, the recent focus of the debt crisis.

Greece and Portugal, bailed out to avoid default, are in deep recessions.

Germany should outperform the United States, which announces 2011 GDP data on Jan. 27; the IMF has estimated 1.6 percent for the year. The figure remains far short of emerging economies such as China, estimated at 9.5 percent, and India at 7.8 percent.

But it did help bring Germany's deficit down to only 1 percent of gross domestic product, well below the limit of 3.0 percent enshrined in the eurozone's rules.

Germany's strongest growth was seen in the first six months of the year, when consumer spending rose 1.5 percent — the biggest increase in five years.

Exports were also strong, according to Destatis, growing 8.2 percent compared with the year before. Imports rose 7.2 percent.

Simon Junker, an expert with the DIW institute, warned that expectations for the economy in 2012 were damped by the eurozone crisis and that both exports and imports would slow down.

"Germany's strongly export-driven economy will not be able to elude the slowdown of the global economy," Junker said. "Especially German exports will suffer from the eurozone crisis."

However, the DIW said, there is reason to be optimistic if the eurozone governments "manage to quickly and believably contain the crisis."

McHugh reported from Frankfurt.

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