Muted Private Consumption Drives Q4 Contraction

GERMANY PREL Q4 GDP SA -0.2% Q/Q (FCST 0.0%); Q3 +0.5%r Q/Q

GERMANY PREL Q4 GDP WDA +1.1% Y/Y (FCST +1.3%); Q3 +1.4%r Y/Y

• German GDP surprised to the downside in the Q4 flash data, contracting by -0.2% q/q against expectations of flat growth and slowing from the upwardly revised +0.5% q/q growth of Q3.
• Surging energy prices generated the bulk of the fall in private consumption which largely accounted for weaker Q4 economic performance. Robust consumption had elevated growth through the first three quarters.
• Despite the surprise to expectations, the contraction was largely in line with contractionary signals from PMI readings throughout the fourth quarter.
• Recent rebounds in optimism and growth outlooks in survey data has largely been regarding future expectations rather than the present economy which continued to face substantial headwinds of muted demand and soaring inflation into year-end.
• This data adds downside pressure to the eurozone aggregate print, which is currently forecasted to dip into a contraction at -0.1% q/q.