Europe's biggest economy stuttered to a halt late last year and consumer sentiment continued to fall in the following months but analysts say another German recession is not in the cards.
German activity stagnated in the fourth quarter of 2009, with statistics released today confirming zero growth from October through December as consumers cut back and companies slashed inventories.
'The slight upward trend observed for the economy in the second and third quarter of 2009 did not continue,' the Destatis statistics office said.
A key reason was a 1% drop in household consumption, which along with slumping corporate investment and lower public spending left trade as the only contributor to gross domestic product.
Consumption had been underpinned by a cash-for-clunkers scheme for the car industry that expired in September and economists noted that consumption after the car scrap scheme simply 'does not exist'.
German consumer sentiment has fallen steadily and marked its fifth decline in a row when the GfK research institute released its latest barometer, which dipped to an indexed 3.2 points for March from 3.3 points in February.
Concerns about rising unemployment and the effect of debt and deficit crises in southern Europe are weighing on sentiment, the research group said as German households continued to favour saving over spending.
The GfK poll was released a day after the Ifo institute said German business confidence had slipped unexpectedly for the first time in nearly a year.
Other analysts noted sustained demand for German products however and said that once winter weather had passed, the economy would get back on track.
Germany suffered its worst post-war recession last year, with activity contracting by 5% compared with 2008, the Destatis data confirmed. The government has forecast growth of 1.4% this year.
Destatis also revised the 2009 German public deficit higher to €79.3 billion or 3.3% of GDP, from an initial estimate of 3.2%.
Under the European Union's Stability and Growth Pact, EU members are supposed to run deficits no larger than 3% of GDP, and work towards a balance or even a surplus in times of economic growth.
