German economy at its strongest in three years in 2014

Private consumption and trade fuelled a 1.5 per cent expansion of the German economy in 2014, its best performance in three years but a result which masked weakness in the final three quarters of the year.

Private consumption added 0.6 percentage points to growth last year, preliminary data from the Federal Statistics Office showed.

Record high employment, rising wages and moderate inflation are all boosting household spending in Germany.

Foreign trade, a traditional driver of the economy which has lost momentum in recent years, contributed 0.4 percentage points despite persistent sluggishness in Europe, Germany’s main export market, and crises in Ukraine and the Middle East.

But economists pointed out that the economy had not fared as well in 2014 as the full-year data for gross domestic product (GDP) growth suggested.

“On closer inspection, the German economy was in stall mode for much of the year,” said Ferdinand Fichter of the DIW economic institute in Berlin. “In reality it was only the strong start to 2014 that led to this good result, and that was largely down to a mild winter.”

The German economy started the year with robust quarter-on-quarter growth of 0.8 per cent, only to contract in the second quarter and narrowly avoid a technical recession with meagre growth of 0.1 per cent in the third. Coalition sources said earlier on Thursday that the government was considering revising up its forecast for 2015 GDP growth to 1.5 per cent from a current target of 1.3 per cent.

Earlier this week Germany boasted that it had balanced its budget for the first time since 1969.

Berlin had been aiming to achieve the so-called “schwarze Null” (zero deficit) in 2015, but strong tax revenues and lower debt service costs due to rock-bottom interest rates helped it meet the goal a year early in 2014, the finance ministry said.

Reuters