Germany’s quarterly growth rate more than doubled in the last three months of the year, pushing Europe’s largest economy to its best year of annual expansion since 2011.
GDP growth in the German economy was confirmed at a pace of 0.4 per cent by Destatis this morning, up from 0.2 per cent in the previous quarter and helping overall 2016 output to rise by 1.9 per cent – the best figure in five years.
Expansion was driven by the robust German consumer with domestic demand adding 0.9 per cent to quarterly GDP, supported by 0.8 per cent growth in government expenditure and a 1.8 per cent climb in exports.
It means Germany topped the list as the world’s fastest major advanced world economy in 2016, surpassing the UK which had its annual growth revised down from 2 per cent to 1.8 per cent in figures out yesterday.
The German consumer has been powering the country’s recent growth acceleration with trade also supporting expansion. The quarterly export performance reversed a -0.3 per cent contraction in the third quarter and came in better than a 1.4 per cent estimate.
Imports also had a bumper quarter, climbing 3.1 per cent on the quarter from just 0.2 per cent in the period prior (estimate: 1.8 per cent).
Yesterday, Germany avoided a reprimand from the EU for breaching its balanced budget rules with a record 8.7 per cent of GDP current account surplus in 2016.
Although Brussels has admitted the surplus is “not healthy” and poses a risk to the rebalancing act within the eurozone, Berlin avoided sanction from the Commission.
Germany’s consumer-driven growth could moderate this year on the back of higher inflation, which has hit a more than four-year high of 1.9 per cent last month.
A survey of consumer sentiment from GfK this morning tumbled by more than expected to its lowest level in four months, with households citing higher inflation and the election of Donald Trump as reasons for caution in the months ahead.
Still, a separate survey data from the country’s private sector businesses point to another growth acceleration at the start of the year. German manufacturers reported their best month of activity in three years in February according to IHS Markit.
Stefan Schilbe economist at HSBC, expects trade, government spending and consumer demand to keep supporting growth in Europe’s largest economy this year, predicting a GDP growth rate of 1.6 per cent.
Although evidence suggests the traditionally thrifty German consumer is loosening her purse strings, a measure of household savings in the country also hit a five-year high at 9.9 per cent.
The higher savings rate reflects concerns about ultra-low interest rates in a country which has been one of the loudest critics of monetary policy in the eurozone, noted Mr Schilbe.
“Households are worried about their retirement savings and save more as a result”, he said.