German upturn enters a new phase

The German economy continues to be advancing full steam ahead: According to the preliminary estimate released by the German Federal Statistical Office, gross domestic product (GDP) for the third quarter of 2017 was 0.8 percent higher than in the second quarter of 2017 after adjusting for prices. In the first half of 2017, GDP rose appreciably, namely by 0.6 percent in the second quarter and 0.9 percent in the first quarter. The new data can most definitely be considered another positive surprise on the part of the German economy. The strong momentum in the third quarter means that a growth rate of over 2 percent is now on the cards for 2017 as a whole.

What is especially gratifying is that the upturn now seems to be increasingly driven by investments. For a long time that was the weakest point in the current economic recovery, which has now endured for eight years. In recent years, growth has above all been buttressed by consumer spending, which has in turn benefited from good labour market conditions.

Since last year, exports have also again developed new zest, as the global economy has been picking up and the demand for German products has thus risen. If companies are now increasingly investing in the domestic market, this will likewise support productivity. This can then also unleash stronger rises in wages, and the upturn would enter a new phase. A boom scenario, such as the Council of Economic Experts recently outlined, is by no means unrealistic given the extreme monetary policy setting.

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