FRANKFURT”•Germany’s economy expanded by 0.4 percent in the last quarter of 2016, official data showed Tuesday, confirming that Europe’s powerhouse grew 1.9 percent over the whole year.
The growth rate in the period from October to December”•adjusted for price, seasonal, and calendar effects”•followed 0.7 percent in the first quarter, 0.5 in the second and 0.1 in the third, the federal statistics office Destatis said.
“Compared with the previous quarter, positive impulses came from domestic activity,” the statisticians found, pointing to increased state and household spending and a rise in investment, especially in construction.
Germany’s traditionally powerful exports contributed less to growth in the fourth quarter, as imports increased faster, Destatis added.
“The strong labor market, low interest rates, low inflation, higher wages and increased government consumption due to the influx of refugees” all contributed to growth in 2016, economist Carsten Brzeski of ING Diba bank noted.
But external shocks like Brexit and the election of Donald Trump highlighted the economy’s “most vulnerable parts: industrial production and exports,” he noted.
Inflation in Germany stood at 1.9 percent in January, the statistics office said in a separate release, confirming preliminary figures issued last month.
A recent spike in inflation”•which hit 1.7 percent in December after just 0.8 in October and November”•can largely be traced back to energy prices, recovering from a deep trough in early 2016.
Energy costs increased some 5.9 percent in January compared with the same month last year, Destatis calculated.
If energy costs were left out of the measure, inflation would have stood at a lower 1.5 percent last month, the statisticians went on.
Inflation as measured by the Harmonized Index of Consumer Prices preferred by the European Central Bank also stood at 1.9 percent.
The figures place Germany at almost exactly the level of price growth”•close to, but below 2.0 percent”•targeted by ECB policymakers.
With annual growth of 1.9 percent last year, Germany has driven Europe’s slow but steady recovery, aided by a weak euro, cheap oil and the European Central Bank’s stimulus policies. While those tailwinds boosted consumer spending and supported exports, rising inflation pressures and uncertain prospects for global trade have cast doubt over whether the pace of expansion can be maintained.
German fourth-quarter GDP was led by domestic demand, the statistics office said. Government spending increased markedly, and households raised consumption slightly. Investment also developed positively, bolstered by building. With imports outpacing exports, net trade was a drag on growth.
“The data are alright”•German growth is solid, and impulses came exactly from where we expected them to do,” said Marco Wagner, an economist at Commerzbank AG in Frankfurt. “Growth drivers will be similar in 2017.”
The euro fell after the report and traded at $1.0613 at 8:25 a.m. Frankfurt time.
Higher inflation in Germany than the rest of the 19-nation eurozone has prompted politicians to grumble at the ECB’s historic low interest rates and mass bond-buying policy, which they say are hurting savers.