German growth slows to zero

The German economy may pick up later in the year

Official figures confirmed the fact that the German economy slowed to a halt in the second quarter of the year.

Second-quarter gross domestic product (GDP) was the same as in the first quarter, and only 1% up on the same period of 2000.

The figure had been widely anticipated, and was heralded last week by a forecast from the Bundesbank.

And although gloomy, the zero-growth figure was better than had been feared by some, after a swathe of depressing economic data throughout the summer.

Cautious optimism

Most analysts were relatively cheered by the GDP number.

"The figure that strikes me most is private consumption which shows a 0.9% increase quarter on quarter," said Christoph Hausen, an economist at Commerzbank.

"We are more confident that there will be more tax reform effect in the second half of this year. In addition we have a lower inflation rate, which will give another boost to purchasing power and thus private consumption."

The finance ministry was cautiously upbeat.

The figures "show without a doubt the risks of the economy have not receded," the ministry said in a statement.

"At the same time there are chances that the forces of growth will gain the upper hand in the course of this year.

"We expect that the economy - alongside slowing inflation pressure - will gradually gain pace."

Slowing, not slumping

The German economy, Europe's largest, has slowed this year.

Although the government is still officially sticking to its forecast of 2% GDP growth in 2001, Chancellor Gerhard Schroeder has said the eventual figure could be lower.

He is keen to stimulate the economy - and especially to boost employment - ahead of next year's elections.

Given these figures, the finance ministry may revise its own official forecasts for this year.