Tuesday, August 25, 2009

The German GDP Recovery

Bloomberg details:

Government spending lifted Germany out of its worst recession since World War II, a breakdown of second-quarter gross domestic product shows.

Government spending rose 0.4 percent from the first quarter and helped to boost private consumption, which gained 0.7 percent, the Federal Statistics Office in Wiesbaden said today. Construction investment increased 1.4 percent. GDP advanced a seasonally adjusted 0.3 percent, the office said, confirming an initial estimate from Aug. 13. The unexpected return to growth in Europe’s largest economy followed four quarters of contraction.

While consumption and government spending did grow at 0.7% and 0.4% respectively, as we can see below, they are such a small part of German GDP that they really were not the driver of economic growth. The real impact came from an increase in net exports (exports declined, but by a smaller -1.2% QoQ drop than the -5.1% drop in imports).

In other words, it may have been government spending that helped Germany out of recession, but possibly not theirs.

Source: Destatis