The German economy, Europe’s largest, almost stalled in the second quarter as the region’s sovereign-debt crisis weighed on confidence.
Gross domestic product, adjusted for seasonal effects, rose 0.1 percent from the first quarter, when it jumped a revised 1.3 percent, the Federal Statistics Office in Wiesbaden said today. Economists had forecast growth of 0.5 percent, according to the median of 33 estimates in a Bloomberg News survey. From a year earlier, GDP increased 2.8 percent.
The worse-than-expected GDP data from Germany, which had been powering euro-area growth, add to signs Europe is flirting with a renewed economic slump as the debt crisis curbs spending across the region. France’s recovery unexpectedly ground to a halt in the second quarter, Italian and Spanish expansion remained sluggish and Greece’s economy contracted.
“The German data are certainly disappointing,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. “Going forward, I wouldn’t exclude that the euro area will fall into recession, but the main scenario is still one for weak expansion.”
The euro dropped about a quarter of a cent after the release and traded at $1.4399 at 11:10 a.m. in Frankfurt. European stocks fell for the first time in four days, with the Stoxx Europe 600 Index declining 1.2 percent.
Growth in the 17-nation euro region slowed to 0.2 percent in the second quarter from 0.8 percent in the first, the European Union’s statistics office in Luxembourg said today. Economists had forecast growth of 0.3 percent, a Bloomberg survey shows.
France said last week its economy stagnated in the three months through June, while reports on Aug. 5 showed Italy’s GDP rose 0.3 percent and Spain’s increased 0.2 percent. The Dutch economy grew a less-than-forecast 0.1 percent, while Austria’s expanded 1 percent.
Europe’s malaise is further confirmation of a cooling global economy. Japan cut its annual growth forecast last week on weaker export prospects, Hong Kong’s economy unexpectedly shrank in the second quarter and China’s expansion slowed. In the U.S., Federal Reserve Chairman Ben S. Bernanke signaled he may expand record monetary stimulus to revive a faltering recovery and reduce unemployment stuck around 9 percent.
“The external environment for growth is weakening,” said Christian Schulz, senior economist at Joh. Berenberg Gossler & Co. in London. “Supported by resilient domestic demand, Germany should fare better during the current growth pause than other countries. But if the U.S. were to fall into recession and with it other countries, the large open German economy would be hit harder.”
Some $6.1 trillion has been wiped off equity markets since July 26 after Europe’s debt crisis spilled into Italy and Spain and the U.S. saw its credit rating cut for the first time. The fallout may have a “material adverse effect” on business, Germany’s Kion Group, a forklift maker, said on Aug. 12.
Germany’s second-quarter GDP result is the weakest since the country emerged from recession two years ago, prompting Commerzbank AG to cut its 2011 growth forecast to 3 percent from 3.4 percent. The statistics office revised first-quarter growth down from an initially reported 1.5 percent.
Imports rose more than exports in the second quarter, the office said. While that boosted inventories, it also ensured that net trade had a negative impact on GDP. Private consumption and construction also dragged on growth. Company investment rose. A detailed breakdown will be published on Sept. 1.
“The economy has shifted into a slower gear,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “While there are no signs of a double dip in Germany and all options to turn the corner remain open, recession risks have increased as a result of recent market developments.”
The Bundesbank in June predicted the economy will expand 3.1 percent his year and 1.8 percent in 2012, saying increased household spending will help to compensate for slowing export growth. Unemployment is at a two-decade low of 7 percent.
Even so, confidence among consumers, businesses and investors fell in July. Three of Germany’s biggest companies, Siemens AG (SIE), BASF AG and Volkswagen AG (VOW), reported second-quarter earnings that missed analyst estimates and said they had become more cautious about the economic outlook.
“The second quarter marks a turning point in the German business cycle,” said Andreas Rees, chief German economist at UniCredit Group in Munich. “The period of exuberant growth is now behind us, but German companies do have one major trump card up their sleeve that will soften the negative effects stemming from a slowing global economy -- very high backlog orders which can be worked off in coming months.”
MAN SE (MAN), Europe’s third-largest truckmaker, raised its 2011 earnings outlook last month after second-quarter profit increased and orders climbed 18 percent. Linde AG (LIN), the world’s second-biggest maker of industrial gases, in June won an order to construct Indonesia’s largest air separation plant and on July 29 reported second-quarter profit that beat analysts’ estimates.
In today’s release, the statistics office said it revised its historical data series from 1991 to take account of a new classification of economic sectors.
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