German GDP is also likely to fall in the first quarter of this year, but at a slightly slower pace. At the end of last year businesses radically reined in production with the result that, unlike in previous recessions, they were not sitting on unusually large inventories. As early as January, the manufacturing sector already saw inventories down on earlier levels, according to the Ifo test.

The steeper decline in German GDP compared with other industrial countries stems from the importance of exports to Germany’s economy. International trade in some regions has literally collapsed since last fall. The particularly nasty blow dealt to eastern Europe by the crisis also plays a negative role for Germany. To conclude from the above-average slump in output that the German economy was fundamentally weak would therefore be wrong. Given that there are no fundamental imbalances in the domestic economy, Germany will benefit disproportionately once the global recovery sets in.

Dr. Rolf Schneider

Tel.: 49 / 69 / 2 63 – 5 77 90

e-mail: rolf.schneider@allianz.com