According to data released by the Federal Statistics Office today the German economy continued to expand in the fourth quarter of 2007. The rate of economic growth, however, was down on the previous quarter. Gross domestic product rose by 0.3% in the fourth quarter of 2007 when compared with the third quarter (on a working day and seasonally adjusted basis). In the third quarter of 2007 the GDP grew by 0.7%. Looking at the data on retails sales, exports and industrial output we have been seeing of late this result is hardly a surprise.
GDP was up 1.6% in the fourth quarter of 2007 when compared with the same quarter a year earlier. On a calendar-adjusted basis, the growth rate was 1.8%, since in the fourth quarter of 2007 there was one working day less than a year earlier.
The previously released provisional growth rate of 2.5% (calendar adjusted +2.6%) for German GDP in whole year 2007 remains unchanged.
Economic growth in the fourth quarter was driven by capital investment in machinery and equipment, and on net exports (ie the trade balance), which were partly sustained by the slowdown in imports. A negative contribution was made by domestic consumption, which was characterised by decreasing household final consumption expenditure.
Employment growth remained strong in the fourth quarter, with 40.3 million persons in employment, an increase of 617,000 persons or 1.6% on Q4 2006.
What is evident from all of this is that Germany's expansion is losing momentum as a surge in the euro against the dollar makes exports less competitive abroad just as the U.S. economy hovers near recession and households grapple with faster inflation. The government last month cut its 2008 growth forecast, citing the euro and oil costs., and it now expects the economy to expand 1.7 percent this year, following the 2.5 percent achieved in 2007.
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