Germany uplifts growth forecast to 1.5 pct for 2015

The German government raised its forecast for economic growth in 2015 to 1.5 percent on Wednesday, expecting consumer spending to lead a broad recovery of Europe's biggest economy.

Gross domestic product (GDP) in Germany would increase by 1.5 percent this year, up from the 1.3 percent growth as expected in October last year, said German Federal Economy Ministry in its biannual economic report published in Berlin on Wednesday.

"The German economy has returned to a growth path regardless of geopolitical turmoil last year," Economy Minister Sigmar Gabriel said, adding that stimulus in the new year would mainly come from consumer spending which was expected to be strengthened by the wage growth and low commodity prices.

Consumer spending would rise by 1.6 percent in 2015, following a growth of 1.1 percent in last year, the report said.

The labour market was forecast to remain stable. The number of employment would increase by 170,000 to 42.8 million people, and jobless rate was expected to decline to 6.6 percent from 6.7 percent in last year.

Growth of investment and exports, however, would slow down in 2015 as geopolitical tensions abroad and sick economies in neighbour eurozone countries still challenge German recovery. Investment in equipment was forecast to grow by 1.9 percent, down from a growth of 3.7 percent in 2014. Exports growth would also fall by 0.1 percentage points to 3.6 percent.

Gabriel said German government would strengthen public expenditure on education, research, energy efficiency, infrastructure and improve the environment for innovation and private investment.

Following a weak phrase during the summer months of 2014, German economy revived near the year end and grew by 1.5 percent over the whole year.

Analysts said dropping oil prices and a weak euro would help stimulate German economy. Recent positive indicators also showed a recovery of confidence in Germany at the start of new year.

ZEW's indicator for investors' confidence jumped to its highest level in 11 months in January when Ifo's index for companies' sentiment also climbed for the third consecutive month.

Earlier on Wednesday, Nuremberg-based GfK think tank said its forward-looking indicator for consumers' morale into February surged to the highest level in more than 13 years, boosted by positive economic expectations, income expectations and willingness to buy.

"German consumers have evidently also been affected by the major collapse in energy prices over the past few weeks," said GfK expert Rolf Buerkl in a statement, adding that reduced fuel costs gave consumers greater freedom for other purchases and a considerable depreciation in the euro boosted not only exports, but also companies' willingness to invest.

"It can be assumed that the domestic economy in Germany will again play an essential part in the overall economic development," Buerkl said. Endit