German Fourth Quarter Growth Stronger Than It Appeared At First Glance

When the German first quarter growth number was first published, it was viewed as a disappointment as it showed zero quarterly growth and a 2.4% contraction in yearly calendar adjusted terms.

But while growth wasn't exactly vigorous in the same way that Taiwan's growth was, it wasn't non-existent either. As was revealed in the more detailed numbers later published, Germany experienced significant terms of trade gains, with export prices rising 0.9% on the quarter, while import prices fell 0.5%. As a result, the domestic demand price deflator fell 0.6% even as the GDP deflator fell only 0.1%. If you then adjust the 0.1% nominal decline with the 0.6% drop in the domestic demand deflator, you get an increase in GDP of 0.5%, or 2% at an annualized rate.

Compared to a year earlier, the drop in export prices was 1.9% while import prices fell 4.7%. As a result, the domestic demand deflator rose only 0.2% while the GDP deflator rose 1.1%, trimming the yearly decline from 2.4% to 1.5%.