German Economy Slowly Picking Up

German economy expanded 0.1 percent on the quarter after a sharp contraction at the end of 2012. However, this rate was weaker than expected as a harsh winter prevented a stronger rebound. Nevertheless, increasing domestic consumption is likely to to continue to boost the expansion throughout 2013.
Nuno Fontes | 5/15/2013 8:40:50 AM

In fact, a strong labor market with unemployment near a two-decade low and rising wages is holding domestic consumption. Although, consumer confidence decreased slightly in April, it hit a 3-year high in March. More importantly, in early 2013, shipments have been increasing as German exporters have been able to offset part of the export decline in its core European market with strong growth in to the US and emerging markets. To make things even better, in April, the DAX was at a 6-year high and bund yields were down 0.4 percentage points from a year earlier. However, on the negative side, industrial production shrunk in the first three months of the year and in April, the IFO business climate index fell to the lowest level in 2013.

After contracting 0.7% in Q4 of 2012, the German economy expanded slightly by 0.1% in Q1 of 2013. In March, exports rose 0.5% over the previous month as the decrease in shipments to the EA (-2.6%) was offset by incresing sales to non-EA countries (+1.5%).

The Economic Sentiment Index eased by 12 points in April and was unchagend in May. Also, in March, retail trade decreased 2.8 percent on the year, indicating the country's road to recovery may be bumpy.


In April, IFO Business Climate Index decreased to 104.4, a slight drop from ten-month high of 107.4 reported in February. In March industrial production fell 2.5 percent, down from a 1.8 percent contraction in February.
In March, the unemployment rate was recorded at 5.4 percent, near its lowest level in more than twenty years.