EZA 845 Briefing Note: Germany

19 May 2008

GERMANY – GDP Growth

GDP growth in Germany (and France): Euro area resilience or outlier

1Q08 German GDP growth of 1.5% (relative to 4Q07) came in twice as high as market (and our own) expectations. GDP in France (0.6%) also exceeded expectations.
Growth skewed toward investment activity (equipment and construction).
Since investment was related to one-offs, a significant retrenchment in growth could be expected in 2Q08, only mitigated by some recovery in household spending.
Further out growth is likely to remain below trend for the coming 12 months, when the effects of current euro strength have run their course.


Asset conclusions: strong German activity in 1Q likely to delay rather than obviate any ECB easing.

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