German exports and company spending plunged in the first quarter, dragging Europe’s largest economy into its deepest slump on record.
Exports dropped 9.7 percent from the fourth quarter and company investment declined 7.9 percent, the Federal Statistics Office in Wiesbaden said yesterday. GDP fell a seasonally adjusted 3.8 percent from the previous three months, the office said, confirming an initial estimate from May 15. That’s the steepest drop since quarterly data were first compiled in 1970.
But a survey shows that German consumer confidence is holding steady, signaling that steep declines in Europe’s largest economy may be bottoming out and could stabilize later this year.
The GfK research group says its forward-looking consumer climate index for next month is 2.5 points, unchanged from this month and last month.
The economic crisis has had a slight impact on consumer confidence in recent months, but income expectations have dropped amid job loss fears, and the overall indicator remains low.
GfK said yesterday that “consumer sentiment has yet to face a real test when confronted by the anticipated rise in unemployment.”
The first-quarter drop in GDP marked an unprecedented fourth successive quarterly contraction for Germany’s economy. The government has forecast that the German economy will contract by a massive 6 percent this year.
“The year’s first three months were certainly the worst,” said Ralph Solveen, an economist at Commerzbank AG in Frankfurt. “The economy probably continued to shrink in the current quarter but that should be followed by a stabilization in the second half.”
Consumer spending rose 0.5 percent in the first quarter from the fourth, even as households’ disposable incomes declined 0.9 percent, the statistics office said.
Still, company investment in machinery and equipment slumped 16.2 percent and construction spending declined 2.6 percent, the report showed. Imports fell 5.4 percent in the three months through March, almost half the slump in exports, so that net trade reduced GDP by 2.2 percentage points.
“We expect an ongoing recession in the rest of 2009,” said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. “However, the speed of the deterioration should at least decelerate. This also seems true for foreign demand, thus the export sector should hardly give impulses for the German economy in the next few months but the drag should be smaller.”
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