German economic growth slowed in 2011 as the ongoing debt turmoil that almost pushed Eurozone to the brink of collapse last year damped exports.
The price adjusted gross domestic product, or GDP, rose 3 percent in 2011, slower than the 3.7 percent growth in 2010. This was the second consecutive expansion in national output since the economy suffered a 5.1 percent contraction in 2009 due to global financial meltdown.
Meanwhile, Destatis officials were quoted by reports as saying that the fourth quarter GDP may have dropped by around 0.25 percent. The 2011 growth estimate matched economists' forecast.
The price and calendar-adjusted GDP also recorded an annual rate of growth of 3 percent last year compared to 3.6 percent in 2010.
The contribution from foreign trade reduced in 2011 compared to the previous year. Export growth eased to 8.2 percent in 2011 from 13.7 percent in 2010, while import growth also weakened to 7.2 percent from 11.7 percent. Despite the slowdown in exports, net trade contributed 0.8 percentage points to growth.
At the same time, domestic demand, particularly household spending, contributed positively to overall output. The growth in consumer spending accelerated to 1.5 percent in 2011 from 0.6 percent the year before. Public spending grew 1.2 percent.
The GDP growth also reflected a strong upward momentum in capital formation. Gross fixed capital formation in machinery and equipment grew 8.3 percent in price-adjusted terms and in construction, it was 5.4 percent higher than a year earlier.
In 2011, the country's net borrowing amounted to EUR 26.7 billion or 1 percent of the GDP. The ratio fell below the 3 percent reference value set by the Maastricht Treaty in 2011 after exceeding it in both 2009 and 2010.
The past year was indeed turbulent for the Eurozone powerhouse, but the fallout was limited compared to other big euro members like Spain and Italy. Germany enjoys low unemployment and a resounding export sector, though weak demand has started to bite recently.
The unemployment rate hit a record low of 6.8 percent in December, according to data from the Federal Labor Agency. The Federal Statistical Office said earlier this month that the number of employed individuals reached an all-time high of 41.04 million in 2011, breaching the previous record of 2010.
Nonetheless, many of the economic indicators signal Germany is nearing a soft patch as European leaders wrestle with the debt crisis.
The growth in factory orders eased more than expected in November due to a sharp contraction in foreign demand, while the latest Purchasing Managers' survey pointed to a contraction in the German factory sector in December.
Retail sales declined in November as consumers remained reluctant to spend amid a gloomy economic outlook. Industrial output slid 0.6 percent from a month earlier during the month.
In its December monthly report, Bundesbank said the economic growth will slow notably in 2012 amid a deteriorating global outlook.
The central bank expects the economy to grow only 0.6 percent in 2012, slower than the 3 percent estimated for 2011. In 2013, the economy is seen expanding 1.8 percent. German exporters are likely to see a significant impact from slowing demand in Europe, according to the bank.
German economic growth slowed in 2011 as the ongoing debt turmoil that almost pushed Eurozone to the brink of collapse last year damped exports.
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