Ger­man econ­omy set for more growth after solid fin­ish to 2017

Strong ex­ports drive ro­bust growth as politi­cians bicker

Kuwait Times - - Business -

FRANKFURT: An­a­lysts said yes­ter­day that Europe’s largest econ­omy Ger­many will likely main­tain or pick up its pace of growth this year, after book­ing a 0.6-per­cent ex­pan­sion be­tween Oc­to­ber and De­cem­ber.

“In 2017, all plan­ets were aligned” for the Ger­man econ­omy, Flo­rian Hense of Beren­berg bank said, even as a tricky Septem­ber elec­tion made for months of po­lit­i­cal horse-trad­ing in Ber­lin that has yet to pro­duce a sta­ble gov­ern­ment.

The fourth-quar­ter fig­ure fol­lows up growth of 0.9 per­cent in the first three months of 2017, 0.6 per­cent in the sec­ond, and 0.7 per­cent in the third-all ad­justed for price, sea­sonal and cal­en­dar ef­fects.

Strong ex­ports drove ro­bust growth in Ger­many at the end of last year while in­fla­tion stayed sub­dued in Jan­uary, adding to signs that Europe’s big­gest econ­omy is on track to ex­tend its up­swing well into 2018. With up­beat busi­nesses and house­holds largely shrug­ging off an un­cer­tain po­lit­i­cal back­drop, quar­terly growth reached 0.6 per­cent be­tween Oc­to­ber and De­cem­ber, ac­cord­ing to Wed­nes­day’s Fed­eral Sta­tis­tics Of­fice data.

“The Ger­man growth turbo re­mains fully ac­ti­vated,” Bankhaus Lampe an­a­lyst Alexander Krueger said. While its politi­cians have been mired in coali­tion talks since in­con­clu­sive na­tional elec­tions last Septem­ber, the econ­omy has pow­ered ahead on a con­sumer-led up­swing driven by record-high em­ploy­ment, in­creased job se­cu­rity, ris­ing real wages and low bor­row­ing costs.

That mo­men­tum has been sup­ported in re­cent months by a re­bound in ex­ports and com­pany in­vest­ments. Fourth quar­ter growth was in line with con­sen­sus fore­casts, dip­ping from a down­wardly re­vised 0.7 per­cent in the third. The sta­tis­tics of­fice said pos­i­tive con­tri­bu­tions in the lat­est quar­ter came mainly from for­eign de­mand.

Gov­ern­ment con­sump­tion ex­pen­di­ture in­creased while house­hold spend­ing was lit­tle changed, the of­fice said. It will re­lease more de­tailed re­sults on Feb. 23. On the year, the econ­omy ex­panded a cal­en­dar-ad­justed 2.9 per­cent - miss­ing a con­sen­sus of 3.0 per­cent but still the strong­est pace of growth since the sec­ond quar­ter of 2011. The of­fice con­firmed an ear­lier es­ti­mate for full-year growth of 2.2 per­cent in 2017 which trans­lated into a cal­en­dar-ad­justed 2.5 per­cent, the strong­est pace since 2011.

The gov­ern­ment ex­pects the con­sumerled up­swing to con­tinue this year, fore­cast­ing 2.4 per­cent growth, while the DIHK Cham­bers of In­dus­try and Com­merce raised its 2018 fore­cast to 2.7 per­cent last week. Sound­ing a note of cau­tion, Bankhaus Lampe’s Alexander Krueger said pro­duc­tion bot­tle­necks and ca­pac­ity con­straints were likely to dampen future growth.

But ING Bank econ­o­mist Carsten Brzeski said that, judg­ing from pre­vi­ous cy­cles, “the econ­omy could con­tinue its cur­rent pace for at least one or two more years, with­out show­ing signs of over­heat­ing.”

It had grown in 33 of the last 36 quar­ters, at an “im­pres­sive” av­er­age rate of 0.5 per­cent on the quar­ter, he added.

Sen­ti­ment high

The Econ­omy Min­istry also struck an up­beat tone yes­ter­day, say­ing in its monthly re­port that strong sen­ti­ment in­di­ca­tors and buoy­ant for­eign de­mand for Ger­man in­dus­trial goods were point­ing to a good start for the econ­omy in 2018. “As ca­pac­ity util­i­sa­tion in in­dus­try con­tin­ues to in­crease, high ex­ter­nal de­mand should also stim­u­late do­mes­tic in­vest­ment in equip­ment,” the min­istry said.

“Given the good for­eign trade con­di­tions... the solid up­swing should con­tinue on a broad ba­sis.”

Sep­a­rate data from the Sta­tis­tics Of­fice showed that in­fla­tion re­mained sub­dued de­spite the solid up­swing. EU-har­mo­nized con­sumer prices fell by 1.0 per­cent in Jan­uary and rose by 1.4 per­cent year on year. Equiv­a­lent non-har­mo­nized data showed a fall of 0.7 per­cent and a rise of 1.6 per­cent.

That weak data is lend­ing sup­port to the Euro­pean Cen­tral Bank’s cau­tious ap­proach to re­duc­ing the mon­e­tary stim­u­lus that is sup­port­ing eco­nomic ac­tiv­ity across the sin­gle cur­rency bloc.

Mean­while, con­cerns that the risk of fresh elec­tions may put a damp­ener on that ac­tiv­ity in Ger­many have yet to ma­te­ri­al­ize. “Po­lit­i­cal un­cer­tainty since Septem­ber’s elec­tion ap­pears not to have dam­aged busi­ness or con­sumer sen­ti­ment,” Cap­i­tal Eco­nomics an­a­lyst Jennifer McKe­own said.

Pro­vided that a re­newed ‘grand coali­tion’ gov­ern­ment be­tween Chan­cel­lor An­gela Merkel’s con­ser­va­tives and the cen­ter-left So­cial Democrats (SPD) is fi­nally put in place next month, con­sumer spend­ing should be lifted from ad­di­tional fis­cal mea­sures to help fam­i­lies, she added. —


STUTTGART: This file photo shows em­ploy­ees work­ing on a Porsche sportscar on the assem­bly line in the fac­tory of Ger­man lux­ury car pro­ducer Porsche in Stuttgart, south­west­ern Ger­many. —

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