German second-quarter growth set to have shrunk

Business Materials 14 August 2008 08:25 (UTC +04:00)

German economic growth slumped by 0.8 per cent during the second quarter, analysts' forecast data to be released Thursday will show, amid deepening gloom surrounding the outlook for Europe's biggest economy, dpa reported.

A sharp contraction in the three months to the end of June would represent a dramatic reversal of the first quarter when Germany grew at its fastest pace in 12 years, chalking up an expansion rate of 1.5 per cent on the back of a two-year economic upswing.

A quarter-on-quarter German economic growth rate of 0.8 per cent would mean that year on year, the economy slowed from 2.6 per cent in the first quarter to 1.7 per cent in the three months to the end of June.

While recent monthly data have shown key German exports and production managing to hold up in the face of the global economic slowdown triggered by the credit crunch, other statistics have painted a less encouraging picture of the prospects for the economy.

Once seen by many economists as helping Germany to offset fading world growth, private consumption has taken a hit as energy prices have pushed inflation to record levels and economic worries have set in.

German consumer confidence has slipped to a five-year low, a key survey released last month showed and retail sales fell sharply in June.

At the same time, official data showed factory orders falling with the decline in unemployment slowing and a key survey showing business confidence dropping to a three-year low.