BERLIN (dpa-AFX) - Germany's economy contracted as initially estimated in the second quarter due to weak foreign demand, and there are signs that the shrinking continued into the third quarter, pushing the biggest euro area economy to the verge of recession and strengthening calls for economic stimulus.
Gross domestic product shrank slightly by 0.1 percent quarter-on-quarter in the three months to June, reversing the first quarter's 0.4 percent expansion, detailed results from Destatis revealed Tuesday. This was the first fall in three quarters and matched the initial estimate.
After calendar adjustments, GDP gained 0.4 percent year-on-year, which was slower than the 0.9 percent growth registered in the first quarter. At the same time, the unadjusted GDP remained flat. Both the annual growth figures were left unrevised.
The expenditure-side breakdown of GDP showed that foreign trade was the only component dragging the economy. Household consumption gained 0.1 percent from the first quarter and government spending grew 0.5 percent.
Fixed capital formation in machinery and equipment climbed 0.6 percent and in other fixed assets by 1.0 percent on the preceding quarter. Only gross fixed capital formation in construction decreased, down by 1.0 percent, which was probably because of the mild weather at the beginning of the year.
Meanwhile, exports decreased 1.3 percent on the quarter, which was markedly more than the 0.3 percent drop in imports.
In the August monthly report, Bundesbank said the largest euro area economy could shrink again in the third quarter as the slowdown in the industry continues.
Although the second glance of GDP data has some bright spots, the short-term outlook for the German economy remains bleak, Carsten Brzeski, an ING economist noted.
Nonetheless, Brzeski said after ten years of strong economic growth, stagnation or even a technical recession at this juncture is not yet a reason to panic.
Another report from Destatis revealed that the net lending of general government totaled around EUR 45.3 billion in the first half of the year. As a percentage of GDP, there was a surplus ratio of 2.7 percent.
Since the global economy is unlikely to recover quickly, the pressure for an economic stimulus package is likely to increase further in months ahead, Ralph Solveen, an analyst at Commerzbank, said.
The limited scope for an economic stimulus package may also be one of the reasons why the German Federal Government has so far shown itself to be largely immune to such demands from abroad, Solveen noted.
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