German 4Q Growth Deconstructed

February 25, 2009

Real growth last quarter tumbled 8.2% at an annualized rate (or -2.1% not annualized) and by 1.6% from a year earlier (or 1.7% after adjusted for a different number of working days).  This was the third consecutive quarter of negative growth after annualized declines of 2.2% in 3Q08 and 2.0% in 2Q08.  GDP growth in annualized terms would have been about 2 percentage points lower, that is down more than 10% saar, if not for an unwanted climb inventories as firms underestimated the decline of demand.  Exports (minus 7.3% not annualized) fell twice as rapidly as imports, accounting for most of the drop in GDP.  But business spending on equipment and construction fell by 4.9% and 1.3%, and such exerted around a 2 percentage point drag on annualized growth.  Consumer spending and government spending were comparatively flat on the quarter, while posting changes from 4Q07 of -0.6% and +2.0%.  The quarterly decline in GDP was the sharpest since the first quarter of 1987.

With composite PMI scores of 38.0 in January and 36.7 in February compared to a fourth-quarter mean score of 41.5, growth in the present quarter is likely to be even more negative than the 8.2% annualized drop last quarter.  The table below documents on-year changes in real GDP and major components of demand in the fourth quarter of 2008 and that calendar year as a whole. If one adjusts for the number of working days, overall economic growth slowed to just 1.0% last year.

Year-on-Year Chg 4Q08 2008
GDP -1.6% +1.3%
Consumption -0.6% -0.1%
Investment -0.3% +4.4%
Government +2.0% +2.0%
Exports -5.2% +2.7%

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



One Response to “German 4Q Growth Deconstructed”

  1. […] have dropped at a 7.2% seasonally adjusted annual pace in the quarter.  Unlike Germany (see my earlier post today), the change in British inventories affected economic growth in the U.K. extremely negatively.  […]