FRANKFURT: Exports and consumer demand are cushioning Germany against recession, data showed on Thursday, but crisis clouds are gathering over Europe's biggest economy as business confidence falls sharply.
The German economy grew 0.5 per cent in the first three months of 2012, the federal statistics office Destatis said, with a 1.7-per cent rise in exports and a 0.4-per cent gain in consumer spending helping to avert a recession.
But at the same time, the Ifo economic institute said its closely watched business climate index dropped in May, with the intensification of the Greek crisis and the resulting resurgence in uncertainty in the eurozone as a whole "impacting the German economy."
It was the first time in seven months that the Ifo index has fallen and shows that companies are becoming increasingly spooked by the long-running eurozone debt crisis.
The drop was also the steepest drop since August last year and, at 106.9 points, brings the barometer down to its lowest level since November 2011. Economy minister Philipp Roesler was adamant, however, that despite the unexpected drop in the Ifo index, businesses "remain confident."
The German economy "grew unexpectedly rapidly in the first quarter and is now clearly back on a growth path," he said. "Even in these difficult times, the economy remains robust and competitive. It continues to be the growth locomotive in Europe," the minister insisted.
Observers elsewhere were not so sure. On Wednesday, the Bundesbank had warned in its May monthly report that the "surprisingly good" first quarter growth figures "overstate the current underlying cyclical trend and cannot be extrapolated onto the following quarters."
Analysts said they shared that view that German growth will taper off. "The German economic recovery has hit a fresh road-block that is most likely linked to fears about disruptions due to the eurozone debt crisis," said IHS Global Insight economist Timo Klein.
"Germany's economy appears to have weakened markedly during the second quarter but not necessarily to the point that ... growth has turned negative," Klein said.
Historically low interest rates, persistently strong employment and wage growth, and fairly subdued euro levels should provide some support, he argued.
Annalisa Piazza at Newedge Strategy said that while the first-quarter data "confirm that the German economy held up well at the start of the year ... the breakdown of the data shows a mixed picture" and future risks were "skewed to the downside."
indiatimes.com
The German economy grew 0.5 per cent in the first three months of 2012, the federal statistics office Destatis said, with a 1.7-per cent rise in exports and a 0.4-per cent gain in consumer spending helping to avert a recession.
But at the same time, the Ifo economic institute said its closely watched business climate index dropped in May, with the intensification of the Greek crisis and the resulting resurgence in uncertainty in the eurozone as a whole "impacting the German economy."
It was the first time in seven months that the Ifo index has fallen and shows that companies are becoming increasingly spooked by the long-running eurozone debt crisis.
The drop was also the steepest drop since August last year and, at 106.9 points, brings the barometer down to its lowest level since November 2011. Economy minister Philipp Roesler was adamant, however, that despite the unexpected drop in the Ifo index, businesses "remain confident."
The German economy "grew unexpectedly rapidly in the first quarter and is now clearly back on a growth path," he said. "Even in these difficult times, the economy remains robust and competitive. It continues to be the growth locomotive in Europe," the minister insisted.
Observers elsewhere were not so sure. On Wednesday, the Bundesbank had warned in its May monthly report that the "surprisingly good" first quarter growth figures "overstate the current underlying cyclical trend and cannot be extrapolated onto the following quarters."
Analysts said they shared that view that German growth will taper off. "The German economic recovery has hit a fresh road-block that is most likely linked to fears about disruptions due to the eurozone debt crisis," said IHS Global Insight economist Timo Klein.
"Germany's economy appears to have weakened markedly during the second quarter but not necessarily to the point that ... growth has turned negative," Klein said.
Historically low interest rates, persistently strong employment and wage growth, and fairly subdued euro levels should provide some support, he argued.
Annalisa Piazza at Newedge Strategy said that while the first-quarter data "confirm that the German economy held up well at the start of the year ... the breakdown of the data shows a mixed picture" and future risks were "skewed to the downside."
indiatimes.com
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