World Economy

German Economic Growth Smashes Expectations

German Economic Growth Smashes ExpectationsGerman Economic Growth Smashes Expectations

The German economy expanded markedly in the fourth quarter of 2014, with growth accelerating sharply compared with the marginal increase recorded in the third quarter.

Markit’s PMI data meanwhile signal further economic growth at the start of 2015 and sentiment towards Germany has improved, as signaled by Markit’s ETF data, Alpha reported Monday.

Gross domestic product rose 0.7% in the three months to December, far exceeding expectations and following a fractional 0.1% rise in the third quarter. The statistics body Destatis attributed the rise in GDP to increased household consumption and also observed a positive development for fixed capital formation in machinery and equipment, “especially in construction”.

While exports in goods and services have also increased markedly, “imports rose to a similar extent”.

The increase in construction is particularly surprising, as official monthly data has been weak in recent months. The better than expected data tally with Markit’s Germany Construction PMI, however, where the average PMI reading for the fourth quarter as a whole was the best since Q1, when the German economy expanded by 0.7%.

The weak German GDP numbers in the second and third quarters (-0.1% and 0.1% respectively) always sat uncomfortably with stronger signals from the PMI surveys.

Like the surveys, the GDP data now indicate that Germany in fact had a reasonably good year over 2014 as a whole, growing 1.6%. The GDP data for Germany have simply been more volatile than the PMI, most likely reflecting special factors such as bridging holidays in the summer and unusual weather affecting construction.