The German economy shrank for the first time since the first three months of 2009, while defying expectations for a contraction, the French economy expanded strongly.
After adjustment for price, seasonal and calendar variations, the German economy suffered a 0.2 percent quarter-on-quarter GDP decline in the fourth quarter following an upwardly revised 0.6 percent expansion in the third quarter, according to data released by the Federal Statistical Office on Wednesday.
Foreign trade had a negative impact on economic growth in the last quarter of 2011. Final consumption expenditure also showed a slight decrease, the statistical office said.
This was the first quarterly contraction in economic output since the first quarter of 2009, when it shrank 4 percent. The fourth quarter performance was weaker than the 0.3 percent decline forecast by economists.
Annually, the GDP expanded 1.5 percent in the fourth quarter, slower than 2.6 percent rise in the third quarter. This was slightly weaker than 1.8 percent growth expected by economists. On a calendar adjusted basis, GDP was up 2 percent, in line with expectations. For the whole of 2011, the economy expanded 3 percent, slower than 3.7 percent growth in 2010. This was in line with the statistical office's January estimates. In 2009, the economy contracted 5.1 percent.
Recent economic data showed that exports plunged at the steepest pace in nearly three years in December, as the protracted debt crisis in Europe damped demand within the region. Industrial production also declined in December and at the sharpest pace since 2009, with widespread decreases across sectors
The International Monetary Fund last month slashed the GDP outlook for the German economy to 0.3 percent in 2012. The fund sees no recession in Germany and growth is expected to pick up to a 1.5 percent pace in 2013. Bundesbank said in its latest monthly report that the economy may log a near zero growth in the first quarter of 2012.
Meanwhile, the French statistical office Insee reported today that the French economy expanded 0.2 percent quarter-on-quarter in the fourth quarter compared with economists' expectation for a 0.2 percent contraction. This followed 0.3 percent growth in the third quarter.
The major contributors to growth were investment and trade, according to the statistical office. Over the year, GDP increased 1.7 percent after the 1.4 percent growth in 2010.
Meanwhile, French finance minister Francois Baroin said today that the strong GDP outcome supported the government's official forecast of 0.5 percent growth for this year. The government targets 2 percent expansion in 2013.
France lost its AAA rating in January this year when Standard & Poor's cut its long-term sovereign credit ratings to 'AA+. Moody's Investors Service this week lowered the country's rating outlook to 'negative', while downgrading the ratings on six other Eurozone countries.
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