German economy slows to point of zero growth
Special report: global recession
Charlotte Denny
Friday August 17, 2001
The Guardian
German output has ground to a halt, the country's central bank
admitted yesterday, but it insisted that there was no danger of the
euro zone's largest economy sliding into recession.
Second-quarter gross domestic product is expected to be "unchanged
from the first quarter and to have grown by 1% on the year in real
terms", the Bundesbank said in its August monthly report.
First-quarter year-on-year growth was 2%.
The bank said visions of "the German economy on a recession course are
unjustified", stressing that it saw no clear sign of a downward
spiral. The government is to release official second-quarter GDP
figures on August 23.
The Bundesbank's warning helped check the euro's exuberant recovery
against the dollar which has seen it gain 4.5 cents during the past
week. After hitting a five-month high at above 92 cents on Wednesday,
it slipped nearly half a cent yesterday, hurt by better than expected
US economic figures.
The US consumer price index fell by 0.3% in July, led by lower petrol
prices; it is the largest monthly decline in more than 15 years. Over
the 12 months to July, prices rose 2.7%, the smallest annual gain
since January 2000.
"It's a very encouraging sign that consumers will be able to stretch
their incomes a little bit further - and that bodes well for the
economy," said Gary Thayer, chief economist for AG Edwards & Sons in
St Louis.
Better than expected price data leave the door open for the
inflation-wary Federal Reserve to again lower interest rates when its
policy-setting federal open market committee meets on Tuesday. The Fed
has cut rates six times, by a total of 2.75%, this year to prop up a
shaky economy.
There was good news from the US labour market. First-time jobless
claims fell to 380,000 in the week ending August 11, pulling the less
volatile four-week average down to its lowest level since early March,
raising hopes the worst of the downturn may be over.
