German economy retains strong momentum in fourth quarter 2017

BERLIN, Feb. 14 (Xinhua) -- The German economy retained its strong momentum during the fourth and final quarter (Q4) of 2017, official figures published on Wednesday by the Federal Statistical Office showed.

Gross domestic product (GDP) increased by 0.6 percent in Q4 over the previous quarter. Although the pace of output growth slowed slightly compared to Q3 (up 0.7 percent), the Wiesbaden-based government statisticians emphasized Germany had witnessed a continuous expansion throughout the course of 2017.

"The third quarter was not surpassed, but nobody expected it to be, given that production was hampered by the large number of seasonal holidays in Q4," Joerg Zeuner, chief economist at the state-owned KfW banking group said about the findings.

Nevertheless, the figures published were "indicative of a very good start into the year 2018," Zeuner told the press.

ROBUST GROWTH

On an annual, price-adjusted basis, German GDP was 2.3 percent (seasonally-adjusted 2.9 percent) higher in Q4. Overall, Germany's GDP grew by 2.2 percent in 2017, the biggest increase measured since 2011.

The Federal Statistical Office highlighted the significant role of rising exports and government expenditure in contributing to Q4 GDP growth, while private consumption remained largely stagnant.

German firms achieved a fourth consecutive record for the total annual value of goods exported in 2017, thanks to a strengthening eurozone economy. The EU statistical agency Eurostat estimates that GDP in the countries of the monetary union grew just as fast on average as the German national economy in Q4 with a 0.6 percent quarterly increase.

While less prominent in the figures covering the period between October and December in Germany, experts at the Nuernberg-based consumer research organization GfK still expect private household expenditure to support a positive economic development in the coming year. Low unemployment and rising wages would encourage consumers to spend more.

OPTIMISTIC 2018

The Federal Statistical Office noted that even if German economy remained stagnant for the rest of the year, growth already recorded in January and February meant that annual GDP would be 1.0 percent higher than in 2017.

The German government recently released an optimistic forecast that GDP growth would reach 2.4 percent in 2018. However, observers have since also pointed to political risks which could still derail production.

Carsten Brzeski, chief economist at ING-Diba, warned that alongside a sharp appreciation in the value of the Euro, "unfamiliar fragile politics" in Berlin posed a threat to growth.

Similarly, Martin Wansleben, director of the Association of the German Chambers of Commerce and Industry (DIHK) cautioned that lasting growth was not a natural law.

"The new government should seize the opportunity to improve the competitiveness of Germany if it doesn't want the current investment boom to fade," Wansleben argued.

Speaking to Xinhua on Wednesday, Thiess Petersen, senior economics expert at the Bertelsmann Foundation, further identified volatile financial markets and U.S. protectionism as significant risks to German growth in 2018.

"The expansive monetary policy of central banks since the collapse of the U.S. investment bank Lehman Brothers has pumped enormous amounts of liquidity into markets, leading to a steep rise in the value of equities. The risk that the speculative bubbles created by this process burst again has increased correspondingly," Petersen explained.

Additionally, Petersen cautioned that the "protectionist tendency of the U.S. government endangers global growth." He added that punitive tariffs on solar modules and washing machines announced by U.S. President Donald Trump at the start of the year could mark the "first shot in a global trade war." Enditem