Stagnation in Germany in Q2 2014

Noam Stiekema

The most powerful economy in the Eurozone seems slowdown. In Germany, the economic dynamics in the spring dropped considerably, experts say the central bank – Bundesbank. “In April and May the industry has shifted to a lower gear”, said Bundesbank in its latest monthly report in July. The construction industry has not been able to […]

GermanY Stagnation

GermanY StagnationThe most powerful economy in the Eurozone seems slowdown. In Germany, the economic dynamics in the spring dropped considerably, experts say the central bank – Bundesbank. “In April and May the industry has shifted to a lower gear”, said Bundesbank in its latest monthly report in July. The construction industry has not been able to maintain a very high level of mild winters. To this must be added a number of factors from abroad. Geopolitical tensions in the Middle East and Ukraine can mar consumer sentiment and thus slow down the economy. This is reflected in reduced demand for intermediate goods. However, as the service sector continues to grow, it leads to a sharp drop in economic output.

Now officially the central bank expects stagnation. Real gross domestic product (GDP) of the country will remain in the second quarter of 2014, seasonally and calendar adjusted to the first three months, experts predict. Official to official economic performance in the second quarter will be presented, as usual, a few weeks – on August 14. In the period from January to March, the German economy has very strong growth even by German standards. In the first three months of 2014, the German economy grew the most in three years. Because of the increased investment companies and good consumer sentiment GDP rose by 0.8% from the previous quarter.

The warning contained in the monthly bulletin of the Central Bank, is an indication that the Eurozone will struggle to improve the meager growth rate of the first quarter. Germany accounts for about 30% of the GDP of the currency bloc. In the first quarter, Eurozone GDP grew by only 0.8% annually, or 0.2% on a quarterly basis despite annual growth of 3.3% in Germany. If we exclude the largest economy in Europe, the Eurozone economy would have posted a slight contraction in the first quarter. From the expert point of view, these factors suggest “for dynamic economic development, particularly of the national economy,” wrote another experts of the German Central Bank It will be mostly driven by “favorable situation on the labor market and the associated increase in income” said the monthly report.

Bundesbank for some time suggests that the rapid pace of growth in the first quarter can not be maintained. Primary trend of the German economy remains upward and conditions of relatively high economic growth are good, explain experts in June. 2014 Bundesbank predicted real growth of the German gross domestic product (GDP) of 1.9% (compared to 1.7% in the December forecast). By 2015, experts expect growth of 2% and in 2016 – 1.8 %.

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