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Growth

German economy shrinks amid crisis fallout

Germany's economy suffered a surprise contraction in the second quarter, as its GDP shrank for the first time in more than a year. Uncertainty caused by global conflicts led to lower trade and investment.

Germany's Federal Statistics Office, Destatis, on Thursday released the second-quarter growth figure for Europe's biggest economy showing a contraction by 0.2 percent compared with the previous three-month period.

In addition, Destatis revised the German first-quarter GDP figure from 0.8 percent to 0.7 percent. The decline between April and June surprised analysts, who had predicted the German economy would stagnate in a consensus forecast.

"The slowdown was more significant than expected. We don't see much of an upswing in the third quarter either," Holger Sandte from Nordea Bank told the news agency Reuters.

Stefan Kipar, analyst with regional German lender BayernLB, told the same news agency that uncertainty over the crisis in Ukraine and other regional conflicts would continue to stall German growth, with foreign trade failing to provide "a significant boost in the foreseeable future."

Gains in private and public spending, the statisticians said, had failed to offset a marked decline in construction activity. Moreover, the German foreign trade balance contributed less to the gross domestic product than in previous quarters because exports had fallen while imports had grown. Lackluster capital investment also reduced growth, Destatis added.

The data, combined with weakness in other large countries like Italy, is likely to raise new doubts about the recovery in the euro zone. The currency area is struggling to emerge from a deep recession, with the recovery proving to be fragile so far.

uhe/kms (dpa, Reuters, AFP)

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