Macroeconomic conditions

The German economy performed significantly better in 2010 than it did in the previous year. Real (price-adjusted) gross domestic product (GDP) rose by 3.6% in Germany (previous year: -4.7%). As 2010 had more working days than the preceding year, there was a slight change in the growth rate (3.5%) after adjustment for the calendar effect.

Gross domestic product in germany (after adjustment for prices)
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This sharp turnaround in the growth of price-adjusted gross domestic product (GDP) is primarily attributable to net exports, the difference between exports and imports, which had a dampening effect in previous years. GDP was further strengthened by investments in capital goods and consumption within Germany. This helped to balance out the weather-related fall in construction investment, in particular.

According to the Federal Statistical Office, consumption was up in 2010 over the previous year: private consumer spending, the most substantial component of GDP, rose by 0.5% (price-adjusted). Almost all spending on other purposes was higher than in 2009. Transport and communication were the only areas where spending was clearly down on the previous year. The main reason behind this is the inclusion of private vehicle purchases which saw a sharp drop in 2010 after the boom triggered by the scrapping premium in 2009. Government consumption expenditure also recorded a rise in 2010 (+2.2%). At 11.4%, the savings rate exceeded the high level of the previous year by 0.3 percentage points.

The German consumer price index rose on average over 2010 by 1.1% in comparison with the previous year. Inflation was significantly higher than in 2009 (0.4%) but viewed from a longer-term perspective it was below the annual inflation rates for most years since 1999 (1.5%). The main reason behind this sharp rise was the increase in fuel prices. Food prices increased by 1.6% in 2010, while price reductions were recorded for communication (-2.0%), among other things.

After the crisis of 2009, the labour market enjoyed the benefits of the strong economic recovery in 2010. In comparison with the previous year, unemployment in Germany fell in 2010 by 0.5 percentage points to 7.7%. The number of those out of work fell on an annual average by 179,000 to 3.24 million.

Within Europe, initial signs point to a return to growth in 2010 after the economic setback of the previous year. According to information from Eurostat, the Statistical Office of the European Community, GDP for the EU-27 rose by 1.8% during the year under review, after the significant fall of 4.2% during 2009. However, inflation rose on an annual average: after price rises of 1.0% in 2009, this value rose to 2.1% in 2010. The unemployment rate rose slightly in the eurozone to 10.0% (2009: 9.4%).

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