German Economy: Weak Q4 Growth but Promising Signs for 2003

27 February 2003

New figures send mixed signals for the German economy, with weak economic growth mitigated by a steep rise in business confidence.

According to the Federal Statistics Office, Germany registered zero GDP growth in the fourth quarter compared with the third, while full-year expansion stood at just 0.2%.

Some economists fear the nation will slip into recession in early 2003. Those of a more bullish nature, however, may take heart from the fact that the economy grew by 0.5% in Q4 on a year-on-year basis, though admittedly this is slower than Q3’s 1% expansion.

Optimists will also be cheered by the improvement in business sentiment reported by the Ifo economic think-tank.

The body’s closely watched index of corporate confidence in Western Germany jumped from 87.4 last month to 88.9 in February, its highest reading since July last year. Businesses’ assessment of the current climate rose from 77.1 to 79.6, while expectations for the future edged up from 98.1 to 98.4.

The East German index also increased (from 97.5 to 101.9), prompting Ifo president Hans-Werner Sinn to declare: “For Germany as a whole, the signs for a turn to the better are increasing.”

However, not wishing to count his chickens on the basis of one month’s results, he added much would depend on the March figures.

Data sourced from: multiple sources; additional content by WARC staff