Germany economy powers ahead

Private consumption and trade fuelled a 1.5% expansion of the German economy in 2014, its best performance in three years but a result which masked weakness in the final three quarters of the year.

Private consumption added 0.6 percentage points to growth last year, preliminary data from the Federal Statistics Office showed.

Record high employment, rising wages, and moderate inflation are all boosting household spending in Germany. Foreign trade, a traditional driver of the economy which lost momentum in recent years, contributed 0.4 percentage points despite persistent sluggishness in Europe, Germany’s main export market, and crises in Ukraine and the Middle East.

However, economists pointed out the economy had not fared as well in 2014 as the full-year data for gross domestic product growth suggested. “On closer inspection, the German economy was in stall mode for much of the year,” said Ferdinand Fichter of the DIW economic institute in Berlin. “In reality, it was only the strong start to 2014 that led to this good result, and that was largely down to a mild winter.”

The German economy started the year with robust quarter-on-quarter growth of 0.8%, only to contract in the second quarter and narrowly avoid a technical recession with meagre growth of 0.1% in the third. Coalition sources said yesterday the government was considering revising up its forecast for 2015 GDP growth to 1.5% from a current target of 1.3%.

If Germany grows by 1.5% in 2015, it will be thanks to the cheap oil prices and weaker euro.

* Reuters