The German economy kicks off the year on a strong footing

The German economy is growing faster again – and is doing so despite the risks on the foreign policy front. Gross domestic product (GDP) rose 0.6 percent on the previous quarter, the strongest increase in a year. Higher investments, rising consumer spending, and more exports sent the economic output northwards between January and March. In Q4 2016 the increase was 0.4 percent and thus considerably smaller. In other words, the German economy defied the uncertainties associated with President Trump taking office and the approaching Brexit.

Although they have not yet released any of the details, the statisticians say that domestic and external factors stimulated growth. Especially gratifying in this context: Investments climbed sharply again. “Significantly more” has been committed to both buildings and equipment, e.g. machinery, with low interest rates no doubt playing a role. Previously, equipment investments had fallen for three consecutive quarters despite the well-oiled economic cycle and high capacity utilisation.

Private households and government also spent slightly more for consumer articles. Since for some months inflation had been on the rise and ate into consumers’ purchasing power, the money will presumably no longer have sat so loosely in their pockets. Given the improved global economy, exports outpaced imports, which likewise boosted the economy. Key buyers of German products such as the EMU member states and the major emerging markets are currently on an economic up.

With the strong figures for Germany, the economic discrepancies inside Euroland have also grown, however, as Germany continues to outgrow the two other large economies in the Eurozone. France reported Q1 2017 growth of only 0.3 percent, while the central bank in Italy is suggesting that growth there will be a mere 0.2 percent. This is not likely to make the political negotiations on the strategy for Euroland going forward any easier.

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