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Domestic demand drives German growth in Q1

Xinhua, May 25, 2016 Adjust font size:

Thanks mainly to domestic demand, the German economy grew strongly in the first quarter of 2016, said German federal statistics office Destatis on Tuesday, confirming its preliminary calculations earlier this month.

Compared with the final quarter of 2015, Europe's biggest economy grew by 0.7 percent in the first quarter of 2016. This was Germany's strongest quarterly growth in 2 years, according to Destatis.

Both consumption and investment made positive contributions to the growth. Household consumption rose by 0.4 percent, government spending increased by 0.5 percent. Investment in equipment went up by 1.9 percent, investment in construction jumped by 2.3 percent.

Foreign trade, however, was a drag for the growth, as exports increased at a slower pace than imports. According to Destatis, net exports had a downward effect of minus 0.1 percentage points on the growth.

On Tuesday, the Association of German Chambers of Commerce and Industry (DIHK) raised its forecast for Germany's 2016 growth to 1.5 percent.

"Construction and consumption will carry the economy through the year," said DIHK Managing Director Martin Wansleben in a statement, citing stable labour market, increasing wages, low interest rates, falling oil prices and increasing government spending on accommodating and integrating a record influx of refugees as positive factors for the economic outlook.

However, he noted that Germany's foreign trade prospect remained subdued.

Also on Tuesday, a survey by the Centre for European Economic Research (ZEW) showed that German investors' confidence dampened in May due to concerns about risks including a possible exit of Britain from the European Union.

"The strong growth of the German economy in the first quarter of 2016 appears to have surprised the financial market experts. However, they seem not to expect the economic situation to improve at the same pace going forward. Uncertainties regarding developments such as a possible Brexit currently inhibit a more optimistic outlook," said Achim Wambach, President of ZEW. Endit