* German Q2 GDP +0.3 pct, beats forecast +0.2 pct
* ZEW sentiment index drops fourth month in a row
* Economists say Germany no longer immune to crisis
* Few forecast sustained recession
By Sarah Marsh and Annika Breidthardt
BERLIN, Aug 14 German growth slowed in the
second quarter and a key sentiment indicator dropped for the
fourth successive month, threatening contraction for Europe's
largest economy if the euro zone crisis runs unresolved for much
German gross domestic product (GDP) grew by 0.3 percent in
the second quarter, data showed on Tuesday, a touch better than
expected and helped by exports to countries outside of Europe as
well as a pick-up in consumption.
But growth slowed from 0.5 percent in the first three months
and the forward-looking ZEW sentiment index undercut even the
lowest estimate in a Reuters poll, falling to -25.5 from -19.6.
"Growth turned out to be pretty solid. But this could be the
last positive piece of news out of Germany for some time," said
Joerg Kraemer at Commerzbank.
"The German economy could contract in the summer. It is
fundamentally in good structural shape, but can't decouple from
the recession in the euro zone, plus the global economy has also
shifted down a gear," he said.
If the slowdown were to accelerate, it could affect the
willingness of average Germans to contribute to euro zone
bailouts, but for now Germany's labour market is holding up
well, wages have risen and inflation is relatively low.
A poll for public broadcaster ARD earlier this month showed
63 percent of Germans believe the economy is in good shape
largely because unemployment, at 6.8 percent of the workforce,
remains relatively low. However, there are signs that a nearly
uninterrupted six-year drop in joblessness is coming to an end.
The poll also showed a sharp spike in the number of
respondents who believe the economy will deteriorate over the
coming year. At 56 percent, that total is now at its highest
level since early 2009, shortly after the bankruptcy of Lehman
Brothers triggered the global financial crisis and plunged
Germany into its deepest recession in the post-war era.
Germany's "Teflon economy" has remained resilient throughout
Europe's three-year debt crisis that has hit its peers, which
are also major markets for its exports. But recent data have
showed declines in manufacturing orders, industrial output,
imports and exports.
Last week, the Economy Ministry said Germany now faced
"significant risks" from the crisis.
"Germany is not managing to decouple itself from the rest of
the euro zone," said Bernd Hartmann of VP Bank. "Various forward
looking indicators point to a slight economic contraction in the
third quarter. That means the last pillar of European growth is
Germany is known for its export-driven growth, but the euro
crisis has hit its biggest market. Roughly 40 percent of the
country's exports go to its partners in the currency zone and 60
percent to those in the broader European Union.
China, one of Germany's fastest growing markets representing
roughly 7 percent total exports, is also slowing.
While some economists expect the second quarter could be the
last quarter of growth for a while, few forecast a lengthy
"There will be a weakening in the second half of the year,
then a turnaround at the end of the year and recovery in 2013,"
Marcel Fratzscher, who will take over as head of DIW economic
research institute next year, told Reuters. "I expect a dip, but
not a sustained one."
Economists said German growth was no longer enough to avert
a euro zone recession and exports, which declined for the first
time this year in April, would likely weaken further.
"We do not think that Germany on its own can keep the entire
euro zone afloat," said ABN AMRO's Aline Schuiling.
The euro zone's economy as a whole shrank by 0.2 percent in
the second quarter, having flatlined in the first.
Many still hope German consumption will help the country
itself avoid a prolonged downturn, despite disappointing recent
data, with retail sales falling back.
But the clinching factor will be policymakers' ability to
get on top of the bloc's debt crisis.
"Consumption should stabilise the economy in bad times,"
said Berenberg Bank's Christian Schulz. "It remains decisive
whether the euro crisis can be controlled."