Domestic demand fuels German growth in fourth quarter

Domestic demand drove German growth in the fourth quarter as trade damped Europe’s largest economy.

Private and government spending contributed 0.2 percentage point each to growth, the Federal Statistics Office in Wiesbaden said on Thursday. Net trade subtracted 0.4 percentage point from output, with a 3.1 per cent increase in imports outpacing a 1.8 per cent gain in exports.

Gross domestic product rose a seasonally-adjusted 0.4 per cent in the three months through December, matching a February 14th estimate.

Germany's performance in the fourth quarter suggests the economy is sturdy enough to cope with challenges that may arise from national elections, Brexit, and a more protectionist US administration. Unemployment is at a record low and business confidence is rising, and the Bundesbank has cited a "very dynamic" order intake as a factor driving future momentum.

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A 1.6 per cent surge in construction added 0.2 percentage point to fourth-quarter growth, the statistics office said. Private consumption expanded 0.3 per cent, and government spending was up 0.8 per cent.

The government recorded a surplus of €23.7 billion in 2016, the statistics office said. That’s the highest since the country’s reunification and equals 0.8 per cent of GDP.

Purchasing Manager’s Indexes published Tuesday showed not only Germany’s economy continued its firm upward trend in February. The euro-area recovery also become more broad-based as French output surpassed Germany’s for the first time since 2012. Both national and regional gauges exceeded economists’ expectations.

Bloomberg