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German Growth Picks Up

New residential building permits issued in Germany increased by more than 20% on the year.New residential building permits issued in Germany increased by more than 20% on the year.

The German economy is the largest in the EU and, therefore, the eurozone, so the fact that its economic growth picked up over the course of last year can only be considered to be good news.  German GDP is estimated at $3.36 trillion; the GDP of the EU as a whole, by comparison, is roughly $16.3 trillion.

According to Germany’s Federal Statistics Office, the nation’s GDP expanded by 1.9% last year over the 2015 figure. The growth in the German economy has been put down to increased household spending coupled with greater state spending. Figures suggest that domestic expenditure rose by 2% and governmental spending was up by 4.2%, part of which was attributed to caring for asylum seekers arriving in the country from conflict zones such as Syria and Afghanistan, Daily Forex reported.

Initial estimates predict that Q4 growth will come in at 0.5% for 2016, but the formal first estimate will not be released until February.

If the figures are confirmed, it will point to a modest, but accelerating rate of annual growth of the German economy which grew at 1.6% in 2014, 1.7% in 2015 and 1.9% last year. This is a move in the right direction, of course, but is hardly putting the “clear water” of strong growth behind the global financial crisis.

Germany imported 3.4% more goods in 2016 than 2015, but exported goods also rose by 2.4% over the 2015 level, however, Germany is running a budget surplus.

 Construction Boom

New residential building permits issued in Germany increased by more than 20% on the year in 2016, Housing Minister Barbara Hendricks said on Sunday, suggesting a building boom will continue to support economic growth this year, Reuters reported.

Demand for real estate is soaring in Europe’s biggest economy due to a growing population, increased job security and record-low borrowing costs.

Increased state spending on social housing, not least to accommodate a record influx of refugees, is giving construction an additional push.

“We have succeeded in initiating a turnaround in housing construction within a very short time,” Hendricks said in a Reuters interview.

Permits were issued for more than 380,000 residential buildings in 2016, a sharp increase from the 313,000 permit issued in the previous year, she said.

“That’s the highest number of permits issued in a year since 2000,” Hendricks said.

The construction sector is forecast to continue its solid performance, helped by housing shortages in urban areas and low interest rates that have encouraged more people to buy homes instead of renting.

Construction industry associations expect sales to rise by 5% this year to hit the highest level since 1995, following growth of 5.8% in 2016.

Construction is one of the main drivers of economic expansion in Germany, contributing 0.3 percentage points to an overall GDP growth rate of 1.9% last year, the strongest in half a decade.

Even before the refugee numbers started to increase in 2015, urban areas lacked an estimated 800,000 affordable flats due to higher immigration from other European countries.

With demand outstripping supply, property prices and rents have soared in cities like Berlin, Hamburg and Munich.

Property experts say that at least 350,000 new homes are needed every year until 2020 to cope with the drastic shortage of affordable housing.

Construction associations estimate that between 280,000 and 290,000 new homes were completed in 2016 and they expect up to 320,000 this year.

 

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