September 1, 2011 / 7:07 AM / 8 years ago

UPDATE 3-German growth view darkens on PMI, GDP data

 * Q2 growth confirmed at 0.1 pct q/q
 * Energy imports after nuclear U-turn drove trade deficit
 * Private consumption fell for first time since Q4 2009
 * Manufacturing growth slowest in 23 months in Aug -PMI

 (Adds details, quotes)	
 By Brian Rohan	
 BERLIN, Sept 1 (Reuters) - German consumers' reluctance to
spend and a U-turn on nuclear power weighed on GDP in the second
quarter while export orders fell sharply in August, leaving
Europe's top economy braced for an extended period of slow
growth by year-end at the latest. 	
 Quarterly economic growth slowed to 0.1 percent in
April-June, data from the statistics office showed on Thursday,
confirming preliminary figures that dented hopes Europe's top
economy will continue to underpin the region's fragile recovery.	
 Adding to evidence the outlook is darkening for German
growth, manufacturing activity in the export-geared economy
expanded at its slowest pace in almost two years in August,
separate PMI data showed. 	
 The euro fell following the purchasing managers index
figures, which dropped for the fourth month running, and
analysts said an increasingly uncertain global outlook meant a
longer-term growth slowdown for Germany was very much on the
 "We must get used to the idea of a weak second half. Germany	
is still dependent on exports," said Torge Middendorf at WestLB.	
 Andreas Rees, analyst at Unicredit, said special factors
such as Berlin's decision to scrap nuclear power and a drop in
construction spending meant the second quarter growth picture
was excessively gloomy, and growth should rebound in the third.	
 "After that, however, the German economy will enter a more
difficult phase because the momentum from exports will probably
ease noticeably," he said.	
 The GDP data showed imports overtook exports in the second
quarter, driven by a sudden need for power from abroad and
yielding a trade gap that knocked 0.3 percentage points off the
overall growth figure.	
 "A noticeable effect was felt by the German nuclear exit --
power was hardly exported and stronger imports were necessary in
order to meet demand," the statistics office said.	
 In the wake of March's disaster at the Fukushima plant in
Japan, Chancellor Angela Merkel shut down eight of Germany's
nuclear power generators and later said all its remaining
nuclear capacity would be taken off the grid by 2022.	
 The eight now closed represent over 8,000 MW of generating
 Industry and the country's neighbours had feared the abrupt
change of course could imperil the domestic power supply as well
as increasing energy costs, and utility RWE saw its
first-half core net profit fall 40 percent.	
 Economists said they expect the energy shift to weigh less
heavily on GDP in the third quarter, but the impact could
increase significantly again in the event of a cold winter.	
 "It won't be as strong as the initial impact, which 
resulted from suddenness and shock as the economy was not
prepared for the need to find new sources of energy," said
Carsten Brzeski from ING.	
 "The effects should continue ... in a sort of a zig-zag
depending on the weather," he added. "If we have a harsh winter,
expect a substantial impact from energy imports to weigh on the
trade component."	
 Germany's economy has been a star performer in the 	
industrialised world since the end of the 2008 financial crisis 	
and has underpinned growth across the euro zone.   	
 But doubts have grown about how much longer it can sustain
its expansion in light of an expected slowdown in key markets
abroad, and Thursday's data suggested domestic consumers were a
long way from taking up the slack.	
 The PMI's sub-index for new orders fell 47.0,well below the
50 level that divides expansion from contraction, as new export
orders fell at their fastest rate since mid-2009, Tim Moore,
senior economist at index compiler Markit said.  	
 The GDP report showed private consumption fell 0.7 percent
in the quarter, registering the first drop since the fourth
quarter of 2009. That meant that despite rising investment,
overall consumption knocked 0.3 percentage points off growth.	
 "High inflation probably dampened peoples' desire to buy,"
WestLB's Middendorf said. "Insecurity over the (euro zone) debt
crisis has probably also contributed. It could even get more
pronounced because there is no quick solution in sight."	
 In August, German business morale fell at its fastest rate
since the aftermath of the Lehman Brothers collapse in late
2008, a survey by the Ifo economic think tank showed.	
 The survey, the most closely watched measure of expectations
for German economic activity, suggested the slowdown could be
more marked than many economists had thought.  	
 Compounding concerns, the labour market, one of the
cornerstones of Germany's success, could also be starting to
feel the effects of a slowdown, with data on Wednesday showing
the rate of decline in German unemployment slowed in August.  	
 (Reporting by Brian Rohan; Editing by John Stonestreet)	
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