German GDP contracts 5% in 2009

German GDP contracts 5% in 2009

By Ralph Atkins in Wiesbaden
Published: January 13 2010 10:10 | Last updated: January 13 2010 10:10

Germany’s economy stagnated at the end of 2009, after contracting by 5 per cent
in the year as a whole – its worst recession in post-war history,
according to the country’s statistical office.The unexpected
weakness of Europe’s largest economy in the three months to December
dashes hopes that the recovery might have gathered speed and helped
lift economic prospects across continental Europe.


Unveiling
full-year gross domestic product data, the Wiesbaden-based federal
statistics office gave no official fourth-quarter figure but said
growth had “stagnated”.Full-year figures for German goods
exports are also likely to confirm that the country ceded to China its
title as world export champion.Germany’s export-dependent
economy was among the worst affected by the collapse in global
confidence after the failure of Lehman Brothers investment bank in
September 2008, but it recovered quickly and exited recession in the
second quarter. German GDP then expanded by 0.7 per cent in the third
quarter.Business confidence and other surveys had suggested the recovery had continued in the final months of last year
but at a slower pace. The statistical office’s gloomy report on the
fourth quarter suggested that the unwinding of government support
measures, especially subsidies for new car purchases, may have had a
greater damping effect on growth than feared.The 5 per cent
contraction in GDP in 2009 was less than feared 12 months ago but among
the largest falls reported by the world’s industrialised economies. The
US economy contracted by 2.5 per cent last year. “The German
economy contracted for the first time in six years – and at a pace not
seen before in post-war history,” said Roderich Egeler, president of
the statistical office.The only positive impulse for German
growth came from private consumption, which increased by 0.4 per cent.
In contrast, exports of goods and services contracted by almost 15 per
cent.Thanks to state-subsidised short-time working schemes,
German employment last year sank by only 0.1 per cent – remaining close
to the 40.2m reported in 2008, which was the highest in reunified
Germany. But Mr Egeler reported that the number of hours worked
had fallen sharply. As a result productivity also fell at the fastest
pace since the second world war – by 4.9 per cent in terms of output
per head.The resulting sharp rise in unit labour costs ended the
more than a decade of extremely modest rises, and even year-on-year
falls, that had transformed Germany’s competitive prospects.Separately,
the statistical office confirmed that German’s public sector deficit,
at 3.2 per cent of GDP last year, had breached the European Union’s
limit of 3 per cent as emergency measures pushed government spending
higher.