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Roundup: Domestic demand revives German economy

Xinhua, February 24, 2015 Adjust font size:

The German economy regained its momentum in the fourth quarter of last year thanks to strong domestic demand, official data showed on Tuesday.

Europe's biggest economy grew by 0.7 percent in the last three months of 2014, said German federal statistical office Destatis, confirming its earlier estimation.

Positive contributions mainly came from domestic demand, which contributed 0.5 percentage points to the growth of gross domestic product (GDP), according to the Wiesbaden-based institute.

Household consumption rose by 0.8 percent quarter on quarter, government consumption increased by 0.2 percent, meanwhile investment expanded by 1.2 percent.

Foreign trade also powered economic growth. Exports increased by 1.3 percent quarter-on-quarter. Imports, however, also increased by 1 percent. Net exports thus contributed merely 0.2 percentage points to the GDP growth.

"Following a dynamic start into the year and the subsequent period of weakness last summer, the economic situation stabilised towards the end of the year," said Destatis in a statement, adding that German GDP increased by 1.6 percent over the whole year of 2014.

The German economy narrowly avoided a recession during the summer months last year due to external uncertainties including Ukraine crisis and weak growth of eurozone.

Falling oil prices and a weak euro were believed to be stimulus to German economy at the end of 2014 and would continue to play a supporting role in economic growth this year.

Germany's central bank said earlier this month that it might lift its forecast for German economic growth in 2015, citing robust domestic demands supported by stable labour market and falling energy prices, as well as a revival of exports fueled by a weaker euro.

"The continued employment structure and strong wage growth will boost private consumption," said Ferdinand Fichtner, an expert at the German Institute for Economic Research (DIW).

Nonetheless, Germany's economy still faces "significant risks," according to Simon Junker, another DIW economist.

"The recovery in the eurozone remains fragile, partly due to political uncertainty, most recently from Greece, which has increased significantly again," Junker said, adding that concerns of a possible further escalation of the Ukraine crisis also affected enterprises' willingness to invest.

A separate report from Destatis on Tuesday showed that all German government levels - national, state, and municipal - and social security funds, achieved a surplus in 2014 for the first time since German reunification 25 years ago.

The total surplus amounted to roughly 18 billion euros (about 20.4 billion U.S. dollars), and accounted for 0.6 percent of gross domestic product.

This news could offer more ammunition to critics who, including the United States, the International Monetary Fund, and Germany's eurozone neighbours, have long been accusing Germany of not spending enough to boost investment in Germany and imports from other eurozone countries. Endit