Strong 3.6% fightback for German economy

The German economy grew by a powerful 3.6% last year, surging ahead at its fastest pace since unification two decades ago.

A rebound in exports was accompanied by strengthening domestic demand, official data showed today.

The preliminary growth figure for Europe’s biggest economy contrasted with a painful contraction of 4.7% in 2009, which was by far its worst showing since the Second World War.

Last year’s growth rate was the strongest since East and West Germany were unified in 1990, beating the previous best of 3.4% from 2006.

A key trigger for the strong recovery was powerful growth in exports into a recovering world economy. Germany is the world’s second-biggest exporter after China.

Exports grew by 14.2% last year, reversing a decline of 14.3% in 2009, the Federal Statistical Office said.

The office said in a statement: “What was striking in 2010 was the fact that economic growth was not only based on foreign trade, but also on domestic demand.”

Investment in machinery and equipment was up 9.4%, following a huge decline of 22.6% the previous year. Household spending was up 0.5%, following a 0.2% decline in 2009.

Imports rose 13%, more than making up a 9.4% drop the previous year.

Germany’s swift recovery has made it a stand-out in the 17-nation eurozone, where smaller economies such as Ireland, Greece and Portugal have been struggling with huge debts.

Today’s data showed that Germany’s budget deficit came in at 3.5% of gross domestic product last year – exceeding the 3% limit laid down by European Union rules for the first time in five years.

In 2009, Berlin just managed to comply, with a deficit of 3%.