German economy braves global storms

GDP expands by 1.5% in 2014

BERLIN: The German economy, Europe’s biggest, braved global economic storms to expand by a better-than-expected 1.5% in 2014, and turn in a surplus in its public finances, data showed yesterday.

German gross domestic product (GDP) grew by 1.5% last year, beating the government’s projection of 1.2%, and was sharply improved from the 0.1% growth in 2013, the federal statistics office Destatis said in a statement.

The country’s finances were in order too, with the overall public budget showing a surplus equivalent to 0.4% of GDP, the statisticians said.

“On the whole, the German economy turned out to be stable on an annual average in 2014,” they said in a statement.

At 1.5%, GDP growth was “above the average of the last 10 years of 1.2%,” it said.

“Obviously, the German economy turned out to be strong in a difficult global economic environment, benefiting especially from a strong domestic demand,” Destatis chief Roderich Egeler told a news conference.

“Following a dynamic start to the year and a subsequent period of weakness in the summer, the economic situation had stabilised towards the end of 2014,” Egeler said.

GDP expanded by “around a quarter of a percentage point” in the final three months of the year, said Destatis economist Norbert Raeth.

A more detailed estimate of fourth-quarter GDP data is scheduled to be released in mid-February.

Taking the different GDP components, exports increased by 3.7% across the whole of 2014, consumer spending was up 1.1% and public spending rose 1.0%.

Investment, which had declined in both 2012 and 2013, rebounded, increasing by 3.7%.

Looking ahead to this year, the government is pencilling in growth of 1.3%, but could upgrade its forecast, the weekly newspaper Die Zeit reported.

Economy Minister Sigmar Gabriel is scheduled to reveal his updated forecast at the end of January.

ING DiBa economist Carsten Brzeski said on the basis of the full-year data, fourth-quarter growth likely stood at 0.3%.

“It was a very special year in which the-German economy ... proved unusually sensitive to the weather, the timing of vacation and public holidays,” the expert said.

It had also been hit by geopolitical conflicts in its backyard and ongoing weakness in other euro zone countries.

“However, under the surface ... the economic success story continued as unemployment remained low, employment reached a new record high and private consumption turned out to be an important growth driver,” Brzeski said.

Berenberg Bank economist Christian Schulz agreed.

“After two years of nearstagnation, German GDP recorded a first sizeable increase as the economy shook off the confidence shock of the 2010-2012 euro crisis,” he said.

Schulz said the robust labour market “remains the key strength. As a result, consumption is increasingly becoming the key pillar of economic growth.”

With more and more people working and paying taxes and social security contributions, and increasingly fewer people unemployed and receiving benefits, tax revenues continued to rise more than expenditure.

As a result, “Germany’s fiscal health has not been better in decades,” Schulz said.

The strong fiscal position, the buoyant labour market, low inflation, the sharp drop in oil prices, the lower euro and the monetary easing by the European Central Bank “provide plenty of reasons to be optimistic,” the expert continued.

“We expect the German economy to gradually pick up speed throughout 2015 and reach trend growth rates of around 2.0% annualised in the second half of the year,” he concluded.