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Germany: Upswing drops down a gear

Nov 08, 2010

The 0.9% month-on-month decline in industrial production in September confirms that the upswing in the second half of this year has come off the boil somewhat compared with the first half.  But this does not alter the still positive economic outlook. After all, third quarter industrial production was more than 1½% up on the second quarter. We expect to see a similar increase in the fourth quarter. But at the end of 2010 this would leave industrial production still 6-7% below the level before the economic crisis erupted in summer 2008.

The production figures support our view that third quarter gross domestic product rose by 0.5% on the second quarter. Compared to the corresponding quarter a year earlier, this would give strapping growth of 3.5%.

Net exports made a key contribution to GDP growth in the third quarter. According to our estimates, real exports are likely to have risen by 3-4% on the previous quarter while imports rose by only 1-2%. Domestic demand provided only a limited boost, whereby this needs to be seen in the context of the strong expansion in domestic demand in the first two quarters of this year. Real private consumption probably rose only slightly in the third quarter, similarly construction activity. Equipment investment is likely to have provided a somewhat stronger boost. For 2010 as a whole we expect to see economic growth of 3.4% in Germany.

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Germany: Upswing drops down a gear