World Economy

Numbers Highlight German Economic Strength

On the year, the economy expanded a calendar-adjusted 2.9%.
On the year, the economy expanded a calendar-adjusted 2.9%.

Europe’s largest economy Germany expanded 0.6% between October and December, official data showed Wednesday, highlighting the country’s economic strength as politicians struggle to form a government.

The figure follows up growth of 0.9% in the first quarter of 2017, 0.6% in the second, and 0.7% in the third—all adjusted for price, seasonal and calendar effects, AFP reported.

Combined, the quarterly results add up to 2.2% expansion over the full year, the fastest rate since 2011. Wednesday’s data confirmed a preliminary estimate of full-year growth Destatis released in January.

The final three months of the year saw exports contribute more strongly to growth than they had between July and September.

Meanwhile, private consumption remained roughly flat quarter-on-quarter, while government spending increased. Investments in capital goods increased, while construction spending fell back.

On the year, the economy expanded a calendar-adjusted 2.9%--missing a consensus of 3% but still the strongest pace of growth since the second quarter of 2011. Destatis will release more detailed results on Feb. 23.

“Looking ahead, the same fundamentals which have supported growth in 2016 and 2017 should still be in place” this year, economist Carsten Brzeski of ING Diba bank said, pointing to low interest rates, a strong labor market and a synchronized upturn across the 19-nation eurozone.

“The economy could continue at its current pace for at least one or two more years without showing signs of overheating,” he added.

Germany’s economy ministry in January forecast slightly faster expansion of 2.4% this year.

Risks to the stable outlook remain, including protectionist impulses from President Donald Trump’s administration in the United States, increased geopolitical tensions in the eurozone and further afield, and the danger of a domestic political upset.

The center-left Social Democratic Party has struck a deal to renew its left-right “grand coalition” with Chancellor Angela Merkel’s conservatives after both suffered an election battering in September.

But members in the bitterly divided labor movement could reject the pact in a postal ballot by early March, leaving Merkel with equally unappealing options of a minority government or new elections.

“Following German politics is currently better than binge viewing TV series like ‘House of Cards’,” Brzeski quipped.

Add new comment

Read our comment policy before posting your viewpoints