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German GDP Grows More Than Expected In Q1

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Germany’s economy expanded at a faster than expected pace in the first quarter after shrinking in the previous three months, but rising inflation and the impact of the war in Ukraine have damped the outlook.

Gross domestic product grew a seasonally and calendar adjusted 0.2 percent from the fourth quarter, when the economy contracted 0.3 percent, preliminary figures from Destatis showed Friday. Economists had forecast 0.1 percent growth.

The statistical office attributed the latest growth mainly to higher capital formation, whereas the balance of exports and imports had a downward effect on economic growth.

The economic consequences of the war in Ukraine have had a growing impact on the short-term economic development since late February, Destatis said.

On a year-on-year basis, GDP rose 4.0 percent in the first three months of the year, following a 1.8 percent increase in the previous quarter. Economists had forecast 3.8 percent growth.

The GDP in the first quarter of 2022 was 0.9 percent lower than in the fourth quarter of 2019, the quarter before the Covid-19 crisis, Destatis said.

Due to the continuing Covid-19 crisis and the war in Ukraine, these results are subject to larger uncertainties than usual, the agency added.

Most inflation indicators of Germany are setting new highs in recent months amid runaway energy prices and supply bottlenecks due to the war and a resurgence of coronavirus in some parts of the world.

Figures released earlier on Friday showed that import prices rose 31.2 percent year-on-year, which was the biggest increase since September 1974 during the first oil crisis.

Official data showed on Thursday that German consumer price inflation unexpectedly accelerated further in April to 7.4 percent, a new high in over four decades. Producer price inflation hit a record 30.9 percent in March.

Energy prices have risen sharply since the war in Ukraine and that is strongly influencing inflation across the region as many European countries are dependent on gas and oil supplies from Russia. The rising trend in energy prices is expected to continue for sometime.
This week, the state-owned Gazprom shut gas supplies to Poland and Bulgaria, and Moscow demanded that European customers of its energy should pay in rubles, causing an uproar.

Berlin is trying to end its dependence on Russian oil and gas.
“With the war in Ukraine, today’s GDP growth data has never been more backward-looking,” ING economist Carsten Brzeski said.

“The much more interesting question is how the economy will perform in the second quarter and beyond, against the backdrop?of high energy and commodity prices as well as continuing and new supply chain frictions.”

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