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German economy unexpectedly shrinks

German economy unexpectedly shrinks
Tue Feb 15, 2005 8:06 AM GM

BERLIN (Reuters) - Germany's economy unexpectedly shrank in the final quarter of last year, dealing a blow to euro zone recovery hopes, preliminary German Federal Statistics Office data shows.

The gross domestic product of Europe's biggest economy contracted 0.2 percent from the previous quarter and revised data showed there had been no growth at all in the July through September period.

"This really is a pretty catastrophic figure," said MM Warburg economist Carsten Klude on Tuesday. "It shows the domestic economy is just not getting into gear."

It was the economy's first quarterly contraction since the second quarter of 2003.

The consensus forecast of 37 economists polled by Reuters on Friday was for growth of 0.2 percent in the fourth quarter and analysts said the data cast a shadow over preliminary euro zone GDP data due later on Tuesday.

"I had originally expected a slight acceleration in my forecast (for euro zone Q4 GDP). If we are lucky we can now stick with an unchanged 0.3 percent, because we had a good figure from France," said Elwin de Groot of Fortis Bank.

Germany accounts for around a third of the euro zone economy, which economists last week predicted would grow 0.4 percent in the fourth quarter.

Economists were also disappointed at revisions to previously reported German data. The Office had originally reported third quarter growth of 0.1 percent.

It also cut its estimate of full year 2004 GDP growth to 1.6 percent from 1.7 percent, which could dash the government's hopes of reporting a lower budget deficit to Brussels.

The Statistics Office is due to publish a detailed breakdown of fourth quarter GDP on Tuesday, February 22.


LINK: http://today.reuters.co.uk/news/newsArticle.aspx?type=businessNews&storyID=2005-02-15T080635Z_01...