German 4Q GDP Down On Exports, Helped By Construction

-- Net exports, household consumption a drag on GDP
-- Construction activity, investment prop GDP up
-- Recovery seen in 1Q, helping Germany avoid a recession


FRANKFURT (Dow Jones)--Germany's economy contracted in the fourth quarter of last year due to falling exports and household consumption, data released Friday showed, while recent economic sentiment indicators signal that Europe's largest economy may avoid sinking into a recession in the first quarter of this year.

German gross domestic product contracted 0.2% in the fourth quarter of 2011 compared with the third quarter, according to price-, seasonally and calendar-adjusted figures, the country's Federal Statistics Office, Destatis, said. On a yearly basis, GDP rose 2.0% from a year earlier, in price- and calendar-adjusted terms. The data confirm preliminary estimates published by Destatis earlier this month, and meet the expectations of analysts surveyed by Dow Jones Newswires.

As exports fell faster than imports, net exports fell 0.3% in the fourth quarter from the previous quarter, and were the main reason for the quarterly GDP fall.

Household consumption fell slightly, by 0.2%. "The pronounced weakness in private consumption was a surprise and likely reflects a spike in household uncertainty associated with the intensification of the sovereign crisis late last year," said economist Thomas Harjes from Barclay's Capital.

Only investment increased significantly, by 1.0%, with construction sector investment seeing a particularly robust rise of 1.9%. Public consumption was close to stagnation, rising 0.1%.

Construction output rose the fastest in the last quarter from a year earlier, by 5.6%, while the manufacturing industry, excluding the construction sector, expanded at a 0.7% rate over the same period.

"Looking ahead, there are signs that domestic activity is improving, albeit at a modest pace," said Annalisa Piazza at Newedge in London.

Business confidence indicators such as the Ifo Thursday, the purchasing managers index Wednesday, and the ZEW index earlier this month showed some resilience of Germany to external shocks.

Along with other surveys, Ifo suggests that the GDP contraction of the fourth quarter is very likely to have been a one-quarter slip-up, rather than the beginning of a recession, Societe Generale economist Klaus Baader said.

"Indeed, at face value, the Ifo survey points to a re-acceleration in GDP growth even in year-on-year terms, which would require a quarterly expansion in excess of 1.3% quarter-on-quarter, which we regard as highly unlikely," Baader added, noting that he forecasts first-quarter GDP growth at 0.2%, with a risk to the upside.

The European Commission Thursday revised its growth outlook for the euro zone this year to an annual contraction of 0.3% from its earlier forecast for a GDP increase of 0.5%, including a slower growth rate for Germany. But the Commission noted that the slump of the first quarter was "a temporary interruption rather than signalling an entry into recession."

In the whole of last year, German GDP rose 3.1% after an increase of 3.6% in 2010, also under adjusted figures.