Thread: German Economy Contracted at Record Speed

May 15 (Bloomberg) -- The German economy, Europe’s largest, contracted the most in at least four decades in the first quarter after the global financial crisis curbed export demand and investment.

Gross domestic product dropped a seasonally adjusted 3.8 percent from the fourth quarter, when it fell 2.2 percent, the Federal Statistics Office in Wiesbaden said today. That’s the deepest slump since quarterly data were first compiled in 1970 and compares with the 3 percent decline predicted by economists in a Bloomberg News survey. It also marks an unprecedented fourth successive quarterly contraction.

Chancellor Angela Merkel’s government, which predicts the economy will contract 6 percent this year, is spending 82 billion euros ($112 billion) to haul Germany out of its worst recession since World War II. Some indicators have shown first signs of stabilization, with manufacturing orders rising for the first time in seven months in March and business confidence rebounding from a 26-year low in April.

“I believe there are some grounds for being optimistic that the pace of decline in economic activity will decelerate markedly in the months ahead,” Bundesbank President Axel Weber said this week. “However, it is certainly not advisable to be overly optimistic that the recovery process is safely on track. This will most likely be a gradual process.”

The first-quarter slump was led by a decline in exports and investment, the statistics office said. Consumer and government rose slightly in the quarter, it said. In the year, the economy shrank 6.9 percent when adjusted for the number of working days.

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Europe as a whole is hurting. I think once demand increases their economy will begin to improve.

Indicators show that Europe's economy may begin to improve in the long run soon.