BDI Economic Report

© Plainpicture

In Q4 2009 the pace of the upturn weakened slightly with GDP stagnating at the previous quarter’s level.

While exports increased 3 %, imports decreased 1.8 %. Net exports were balanced out in full by declining public and private spending (-0.6 % and  -1.0 %), lower construction and capital equipment expenditure (-0.5 % and -1.5 %) and reduced inventories (-1.2 %).

In a three-month comparison, German exports increased for the second time in a row. In February 2010 exports grew 5.1 % compared with the previous quarter, while imports nudged up a mere 0.2 %. Factors behind this development are the global inventory cycles and the economic stimulus packages implemented around the world, which are also boosting the German economy as it is so extensively integrated in world trade. Germany is benefiting in particular from the positive economic development in South-East Asia and China as well as from higher economic activity in the US and the Gulf. Declining private spending and diminishing demand for foreign intermediates kept imports down in Q4 2009. As a result foreign trade contributed to growth, and continued to turn global growth to domestic advantage.

The car-buying incentive programme, which has since expired, squeezed private spending in Q4 2009, a major reason for the 1.0 % drop. Retail sales tended downwards. Year-on-year, the change in retail sales was continuously negative between May 2009 and February 2010. Nonetheless, calendar and seasonally adjusted, sales are comparably stable, which is also a reflection of the surprisingly robust job market. March 2010 already showed a slight spring upswing. The number of unemployed decreased year-on-year by 18,000 and in comparison
with previous month figures fell by a further 75,000, bringing the total number of unemployed down to 3.568 million. The unemployment rate dropped 0.2 % to 8.5 %. The job index of the Federal Employment Agency, which measures the human resources demand of enterprises, increased in March. In addition, more trainee positions were registered between October 2009 and February 2010 compared to the same period the previous year. The euro inflation rate is still low (March 2010: +1.3 % compared with March 2009) despite recent increases in energy and oil prices. The relatively stable job market and moderate inflation makes only a slight decline in consumer spending likely.

Investment activity has bottomed out but is still muted due to high overcapacities. Investments actually shrank 0.7 % in Q4 2009, with capital equipment spending going down 1.5 %. In the first two months of 2010, however, capital goods manufacturers recorded sales increases of 5.6 % and 0.8 % respectively. In February 2010, sales increased year-on-year for the first time since October 2008. Construction investment delivered a mixed performance (Q4 2009: -0.5 % quarter-on-quarter). 2009 overall showed an increase of 4 % in residential construction, an increase of around 30 % in public building construction spending, with commercial construction diminishing by 22.4 %. The harsh winter paralysed construction work in the early months of the year, but the impact of this should diminish over the course of the year. Public spending decreased slightly in the last quarter of 2009, but is set to expand once again and will be the only sector of domestic demand making any notable contribution to growth. The upturn is largely dependent on the development of foreign trade.