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Germany Relies on Consumers for Growth

Germany Relies on Consumers for GrowthGermany Relies on Consumers for Growth

Germany relied on domestic consumers for economic growth last quarter as investment fell, putting the strength of the nation’s recovery at risk.

Gross domestic product in Europe’s largest economy gained 0.1 percent in the three months through September, the Federal Statistics Office said Tuesday, confirming a Nov. 14 estimate. Private consumption climbed 0.7 percent, while capital investment sank 0.9 percent, Bloomberg reported.

A near-stagnant euro-area economy and political tension with Russia is curbing German companies’ willingness to invest, potentially undermining growth prospects both at home and in the currency bloc as a whole. The German government has resisted calls to ramp up its own spending as it aims to balance its budget next year, and has put off a 10 billion euro ($12.4 billion) boost in investment until 2016.

“It’s a robust domestic picture – the conditions for domestic demand are very solid, strong labor market, vacancies are still going up,” said Anatoli Annenkov, senior European economist at Societe Generale SA in London. “But there’s a lot of uncertainty from outside, especially from euro-area demand. That affects investment in Germany, which is also a structural problem.”

Government spending increased 0.6 percent last quarter, the statistics office said Tuesday. Exports gained 1.9 percent and imports rose 1.7 percent.

  Business Confidence

A closely-watched survey of business confidence in Germany has revealed a rosier-than-expected outlook. Managers expect things to pick up in the months ahead.

Following six months of steady decline, business confidence in Germany rose in November, the Munich-based Ifo index revealed Monday.

The monthly barometer gauging the mood among German managers increased by 1.5 points to 104.7 this month, even though analysts polled by Reuters had penciled in another drop.

“At least we can say that the downward movement was interrupted,” Ifo President Hans-Werner Sinn said.

Executives assessed their current business climate more positively than in previous months, and they also expressed greater trust in developments over the next six months.

Optimism was particularly widespread in the wholesale and retail sectors, but also in the building industry.

The Ifo index for November contradicted recent low growth forecasts for the Germany economy.

Both the government and leading economic institutions expect German GDP to rise by a mere 1.4 percent throughout 2014. Next year, pundits forecast modest growth between 1 and 1.3 percent in Germany.

Financialtribune.com