german flash q2 gdp preview
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- German Q/Q Seasonally Adjusted Growth Forecast At -0.1pct (prev 0.4pct)

- Y/Y Workday-Adjusted Growth Seen At 0.1pct (prev 0.7pct)

- Y/Y Non-seasonally Adjusted Growth Expected At -0.3pct (0.6pct)

- Weak Late-quarter Data Raises Chance Of Contractions

- Negative Readings Could Reduce Second Estimates For EZ GDP 2 Hours Later

- Data Due At 06.00 GMT Wednesday, 14 August


Frankfurt, 12 August (LS NEWS) – Headline growth in Europe’s largest economy is expected show a contraction in the second quarter following a number of disappointing June indicators released last week, setting up the possibility for reductions in the next estimates for Eurozone economic activity slated for release at 09.00 GMT Wednesday.


A poll of economists now predicts that German GDP contracted at a quarterly rate. Economists had expected flat growth in the second quarter before last week’s announcements of weaker-than-expected data for industrial production and exports in the final month in the period.


A number of observers say the German manufacturing sector is in recession.


Going Sub-Zero?

The weakness of the June data had some analysts hedging their bets. “We expect 0.1pct, but we acknowledge a downside risk to our forecast,” Danske Bank said.


“Even the risk of a sub-zero reading cannot be excluded at this stage. Notably, we will look out for a potential reversal in the very strong investment growth that we saw in the first quarter.”


Claus Vistesen, chief Eurozone economist at Pantheon Economics said he was more pessimistic than the consensus. “We think real GDP in Germany fell by 0.2pct quarter-on-quarter in second quarter, partly reversing the 0.4pct increase in the first quarter, driving the year-over-year rate down to zero. A slump in manufacturing and a knock from net trade likely were the main drivers.”


Support For ECB’s Dovish Tilt

Flat or lower growth in Germany will further validate the European Central Bank’s July shift to an easing bias.

ECB President Mario Draghi said less than a month ago that if the bank makes any move on interest rates by the end of the year, they will be cuts, with the market expecting the first reduction next month. Draghi also noted that policymakers are studying a range of measures, including a restart of quantitative easing.


Eurozone central bankers could receive even more impetus for additional monetary stimulus if German economic weakness leads to reductions of growth numbers for the single-currency area. Some observers said they expect a negative second quarter number for Germany to force a downward revision of second-quarter Eurozone growth. (Read our LiveSquawk preview of Wednesday's Eurozone second-quarter GDP report here.)


Two polls of economists early Monday said the EU’s next round of estimates for Eurozone second-quarter GDP expansion will match the first numbers released on 31 July of 0.2pct on the quarter and 1.1pct on the year.


--- Eric Culp

Twiter: @EricCulpLS

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