Most stock markets around the world moved higher as the Federal Statistics Office (Destatis) said gross domestic product in Germany rose 0.5% in the first quarter from the last quarter of 2011. Compared to the first quarter of 2011, the improvement was up 1.2%, based on price- and calendar-adjusted numbers. Exports powered the increase. Most of this growth probably came from outside the European Union, which makes sense because of trouble in the region. That has to catch up to Germany. It just has not yet.
Destatis broke down the improvement:
In a quarter-on-quarter comparison (upon price, seasonal and calendar adjustment), positive contributions were made mainly by the balance of exports and imports: According to provisional calculations, exports — in contrast to imports — rose at the beginning of the year. Also, domestic consumption was higher than in the previous quarter. This in part compensated for the decrease in capital formation.
Germans were optimistic enough to spend. Germany’s trading partners were optimistic enough to buy its exports. Based on the size of U.S. and Chinese GDPs compared to the balance of the world, a large portion of this demand has to have come from these countries.
Two things should put downward pressure on Germany’s expansion in the next quarter and probably for the balance of the year. Signs indicate a slight slowing of the U.S. economy and a sharper one in China. The central government of the People’s Republic has started stimulus programs, but these cannot entirely offset a drop in demand for its manufactured goods, a drop in real estate values and a slowing of consumption by its middle class. The U.S. economy is bogged down by fights in Washington over the best way to control the American deficit without undermining economic growth.
Germany’s economy cannot survive the collapse of the EU economies forever. The GDP drops in many of the region’s nations has passed the worst of 2008 and 2009. The pressure of austerity and high unemployment will worsen the depressions. And the trouble has moved from the weak nations to Italy and France. French GDP was flat in the first quarter.
Germany’s good quarter has impressed the markets. It will not be repeated for the remainder of the year.
Douglas A. McIntyre