German growth set to slow as euro zone crisis hits home

BERLIN Fri Nov 9, 2012 6:22am EST

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BERLIN (Reuters) - Growth in Germany, Europe's largest economy, is likely to weaken in the fourth quarter of this year and the first of 2013 as firms postpone investments due to the euro zone crisis.

The Economy Ministry said on Friday it expected "a noticeably weaker economic dynamic" over winter.

""Nonetheless at the moment we only expect a temporary period of weakness," it said.

Data this week has shown the private sector contracting, industrial orders tumbling, output dropping and exports sliding at their fastest pace since late last year as demand among its crisis-struck euro zone trading partners weakens.

The ministry suggested shipments abroad, which had managed to hold up fairly well this year as demand from Asia compensated for a weaker appetite in European countries, were unlikely to boost the economy in the months ahead.

"Domestic and foreign demand for German industrial products is declining. There will be a lack of momentum from abroad in the coming months," the ministry said.

The ministry said it expected third-quarter gross domestic product to have increased slightly after rising by 0.3 percent in the second quarter and 0.5 percent in the first.

Germany will publish preliminary GDP data for the third quarter next week. Economists polled by Reuters expect an increase of 0.2 percent on the quarter.

While joblessness has risen for the last seven months -- albeit from a low base -- the ministry said private consumption would probably continue to increase as workers benefit from higher wages and annual inflation stands at 2 percent, just above the European Central Bank's target for the euro zone.

Many economists expect the economy to contract in the fourth quarter for the first time since the end of 2011, though healthy consumer appetite and a robust jobs market should help Germany to avoid a recession.

(Writing by Michelle Martin and Gareth Jones. Editing by Jeremy Gaunt.)

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