Germany posts 'solid' growth at 2015 end

Mercedes vehicles being manufactured in Lundwigsfelde, Germany. Sustained low oil prices and inflation are expected to fuel private consumption.
Mercedes vehicles being manufactured in Lundwigsfelde, Germany. Sustained low oil prices and inflation are expected to fuel private consumption.PHOTO: EUROPEAN PRESSPHOTO AGENCY

Domestic demand helps Europe's biggest economy show resilience to global turmoil

FRANKFURT • Robust domestic demand enabled the German economy, Europe's biggest, to shrug off external headwinds and notch up "solid and continuous growth" at the end of last year, official data showed yesterday.

It was a rare piece of good news in a week when global markets had been hammered over fears about the health of the world economy. The federal statistics office Destatis said that Germany's gross domestic product (GDP) expanded by 0.3 per cent in the period from October to December, the same rate of growth as in the preceding three months.

"The economic situation in Germany was characterised by solid and continuous growth in 2015," Destatis said.

The data was released on the same day the euro zone announced 0.3 per cent growth of its economy in the last three months of last year, unchanged from the previous quarter.

Analysts said the 0.3 per cent gain for the fourth quarter was "something of a relief" after recent weak data suggested the economy was faltering amid global market turmoil and increasing concerns over the outlook for China.

For all of last year, the 19-nation euro zone expanded 1.5 per cent, the Eurostat statistics agency said.

The European Commission last week said it expected last year's growth at 1.6 per cent.

Among other major euro zone economies, France slowed to 0.2 per cent from 0.3 per cent in the fourth quarter. Italian growth also slowed, to just 0.1 per cent from 0.2 per cent as Spain led the pack with another gain of 0.8 per cent. Outside the euro zone, Britain rose to 0.5 per cent from 0.4 per cent.

For the full 28-nation European Union, the economy gained 0.3 per cent in the fourth quarter, down from 0.4 per cent in the third, and expanded 1.8 per cent for the year.

In Germany, following GDP growth of 0.4 per cent in both the first and second quarters, the economy grew by 0.3 per cent in both the third and fourth quarters. That resulted in expansion of 1.7 per cent across the whole year, the statisticians said, confirming a preliminary estimate released last month.

"Positive impulses came primarily from domestic demand," Destatis said. State spending increased sharply and private household was up modestly. At the same time, foreign trade had a dampening effect on growth due to lower exports.

Analysts were cheered by the latest GDP data. "Today's Q4 GDP raises hopes that the German economy is strong enough to defy the turmoil in the global economy and financial markets," said analysts at Natixis.

"We expect that the pace of growth to maintain going into Q1, as the underlying drivers of growth, are here to stay," they said.

Sustained low oil prices and inflation are expected to fuel private consumption, they said, particularly in an economy where wages are rising and unemployment is falling.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on February 13, 2016, with the headline 'Germany posts 'solid' growth at 2015 end'. Print Edition | Subscribe