German gross domestic product (GDP) probably contracted by about 0.25 percent in the July-September period, putting the economy into technical recession, a government official familiar with the data said. The official told Reuters on Friday that government experts were expecting a "decline of about a quarter percentage point" compared to the prior quarter.
"It will be slightly negative," the source said. German GDP contracted by 0.5 percent in the April-June period, the first quarterly decline since 2004. Another drop in the third quarter would put the economy in a technical recession, defined as two consecutive quarters of contraction. The Federal Statistics Office is due to publish preliminary third quarter GDP figures on November 13.
The German economy, which has produced some of its strongest growth rates since unification in recent years, now faces strong headwinds and the government expects it to expand by only 0.2 percent in 2009. Export growth, which has fuelled expansion, is widely expected to slow as the financial crisis hits Germany's main trading partners, German corporations have reined in investment and consumer spending remains lacklustre.
Retail sales slumped by 3.1 percent month-on-month in September, the Bundesbank said earlier on Friday. The decline was the biggest since January 2007, when sales plummeted on the back of the government's three percentage point hike in value added tax (VAT). Other economies in the euro zone are also ailing, with France and Italy seeing GDP contractions in the second quarter and expected to sink into recession like Germany.
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