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Germany’s growth-driving industrial sector enjoyed a bumper end to 2016, topping off a year in which overall economic growth accelerated to a five-year high.
Month-on-month factory orders in Europe’s largest economy rose by a far better-than-expected 5.2 per cent in December having contracted by 3.6 per cent in the month prior, on the back of a 10 per cent surge in export demand from the eurozone. It was the best December reading since 2008.
Year on year, new orders were up by an impressive 8.1 per cent – the best figure since the height of the eurozone’s debt crisis in 2011 (see chart above).
The solid performance comes amid renewed controversy over Germany’s bumper trade surplus and accusations it has “exploited” a weak euro from the new Trump administration in the White House.
Berlin has hit back at any suggestions it is helping to artificially keep down its exchange rate, with finance minister Wolfgang Schäuble attributing the weak euro to the policies of the European Central Bank.
“When ECB chief Mario Draghi embarked on the expansive monetary policy, I told him he would drive up Germany’s export surplus . . . I promised then not to publicly criticise this [policy] course”, Mr Schäuble told a German newspaper at the weekend.
According to Destatis, domestic German demand climbed 6.7 per cent on the month while overall foreign orders were up 3.9 per cent.
“Against the background of Brexit and Trump, today’s data suggest that German industry could shift into a higher gear in the first quarter of 2017″, said Carsten Brzeski at ING.
But Stefan Schible at HSBC warned:
If the global trade environment deteriorates as a result of protectionist policies, German exporters will be hit hard with knock-on effects on production.
Chart via Bloomberg