Germany's worst recession since World War II has lost much of its intensity, according to reports published today by the finance ministry and central bank.
After a disastrous first quarter, 'the recessionary trend has clearly weakened', the Bundesbank said. Economic activity 'should have fallen only slightly' after a record contraction of 3.8% in the first three months of the year from the previous quarter, it added.
Finance ministry officials agreed, saying: 'Available economic data support the hypothesis that second quarter economic activity was undoubtedly better than expected.'
A surprise increase in May industrial orders and production were signs of the improvement, the ministry said.
Although investment by companies is likely to have decreased in the second quarter, trade is expected to contribute to gross domestic product, the central bank said, mainly because imports decreased by more than exports.
Construction activity also probably expanded during the traditional spring surge, helped by an increase in publicly-funded infrastructure projects. Weak inflation combined with a state-funded car scrappage scheme has given consumption a boost as well, the Bundesbank said.
The final second quarter growth figure is to be released on August 13. For all of 2009 however, the government has forecast an economic contraction of 6%, the most since World War II.
