It is a strange habit of the German statistical office to release GDP data for the entire past year before actually publishing fourth quarter data. According to the just released numbers, German GDP dropped by 5% in 2009, the strongest fall since WWII. This was hopefully the last reminder of the severity of the recession.
The recession is yesterday’s story; today’s story is the ongoing recovery. Today’s numbers, however, mask a slowdown of the rebounce in the fourth quarter. The annual GDP drop by 5% would, without any revisions to previous quarters, imply a meagre growth of around 0.2% QoQ in the fourth quarter. The official results for the fourth quarter will only be released in a month from now and some revisions could be possible.
The economic recovery and particularly the surprisingly stable labour market have limited the worsening of public finances in Germany. According to the statistical office, the government’s budget deficit amounted to 3.2% of GDO. Despite all government stimulus packages, the deterioration of public finances has been much more limited than in most other Eurozone countries.
Looking ahead, the recovery will continue this year. With GDP growth above 2%, we expect the German economy to be the growth engine of the Eurozone in 2010. However, the recovery is mainly export-driven, while private consumption except for stimulus-driven car sales remains an untapped source of growth. Rebalancing the economy towards more domestic driven growth looks differently. Not everything is hunky-dory.