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Sat, Feb 14, 2009 - Page 10 News List

German economy declines sharply in fourth quarter

AGENCIES , BERLIN, MADRID AND AMSTERDAM

The German economy shrank by 2.1 percent in the fourth quarter, the most since the country’s reunification nearly two decades ago, as demand for exports fell amid the global downturn, government data showed yesterday.

The sharp decline in the quarter from October to December over the previous three months was the third consecutive contraction in GDP.

Germany’s economy, Europe’s biggest, shrank by a more modest 0.5 percent in both the second and third quarters, putting it into a technical recession.

The German Federal Statistical Office said sharply falling exports — which have long been a key driver of German growth — and lower capital investment were key factors in the decline.

The fourth-quarter figure was worse than the decline of roughly 1.8 percent economists and officials had expected.

“Immediate improvement in the growth dynamic is not in sight,” said Alexander Koch, an economist at UniCredit in Munich.

“The steep downward trend in industrial activity, together with the latest unabated decline in new orders, already heralds another ugly GDP report for the first quarter,” he said in a research note.

The statistical office said the preliminary estimate for fourth-quarter GDP was the biggest quarter-on-quarter fall since German reunification in 1990.

Going back beyond that, Koch said it was the worst since West Germany’s economy suffered a brief collapse in construction activity as a result of a cold winter in the first quarter of 1987.

The government forecast last month that the country’s economy would shrink by 2.25 percent this year, which would easily be its worst performance since World War II. Last year, it grew by 1.3 percent, about half the previous year’s level.

Meanwhile, the Dutch economy has formally slid into a recession, with figures from the fourth quarter last year published yesterday showing a 0.9 percent drop from the preceding quarter.

The Netherlands’ Central Bureau of Statistics figures were the second straight quarter in which the Dutch economy shrank, thereby fulfilling the formal definition of a recession.

The fourth quarter statistics also point to the biggest quarter-to-quarter decline of the Dutch economy since the early 1980s.

On an annual basis, in the fourth quarter last year the economy was down 0.6 percent from the final quarter of 2007, the first year-to-year quarterly drop in five years for the Dutch economy.

On Thursday, Spain’s official data showed that Europe’s fifth-biggest economy entered recession in the fourth quarter for the first time in 15 years, driven down by the collapse of a real estate boom.

GDP contracted by 1 percent during the last three months of last year over the previous quarter and was down by 0.7 percent from the equivalent figure 12 months earlier, national statistics institute INE said.

The economy shrank by a revised 0.3 percent in the third quarter of last year from output in the previous quarter, it said.

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