German economy accelerated in 2016 thanks to higher spending

By The Canadian Press
January 12, 2017 - 1:30am

BERLIN — Germany's economy accelerated slightly last year to grow by 1.9 per cent, narrowly beating expectations thanks largely to household and government spending, official data showed Thursday.

The figure released by the Federal Statistical Office was slightly better than Germany's performance in the previous two years, and also a bit above the 1.8 per cent growth that the government and economists had forecast. Gross domestic product increased by 1.7 per cent in 2015 and 1.6 per cent in 2014.

The statistical office offered a rough estimate that the economy grew by about half a per cent in the fourth quarter compared with the previous three-month period. However, an official fourth-quarter figure won't be released until next month, and statisticians warned that the estimate should be treated with caution.

Domestic spending once again powered the economy, which is traditionally export-heavy, to stronger growth.

Household spending was up 2 per cent last year and government consumption spending 4.2 per cent, the latter partly a result of spending to deal with the previous year's large influx of asylum-seekers. Investment in construction was up 3.1 per cent and spending on equipment such as machinery and vehicles rose 1.7 per cent.

Foreign trade had a slightly negative impact on GDP as a 3.4 per cent rise in imports outpaced a 2.5 per cent increase in exports.

Germany has now enjoyed seven consecutive years of economic growth, a contrast with weak performances in many other European countries. That has translated into healthy government finances.

The country had a 19.2 billion-euro ($20.2 billion) budget surplus last year, or 0.6 per cent of GDP. That was the third consecutive annual fiscal surplus, down slightly from the previous year's 0.7 per cent.

Of the 18 other eurozone countries, only Estonia and Luxembourg are expected to have produced a surplus last year, statistical office head Dieter Sarreither said.

"Despite the stock market crash in China, Brexit, Turkey, Trump and Italy, the economy performed its best growth year since 2011," said ING-DiBa economist Carsten Brzeski. "Strong domestic demand has shielded the German economy against most external risks."

He argued that the biggest risk is complacency, and that Germany urgently needs structural reforms along with stronger investment — but "it is very unlikely that it will get any of these before the elections" expected in September.

Geir Moulson, The Associated Press

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