Tuesday 12 December 2017

German economy growth of 0.4pc weaker than expected

German Chancellor Angela Merkel
German Chancellor Angela Merkel

The German economy grew by a weaker than expected 0.4pc last year, its worst performance since the global financial crisis in 2009.

A preliminary gross domestic product (GDP) estimate from the Federal Statistics Office, released on Wednesday, fell short of the consensus forecast for a 0.5pc expansion in a Reuters poll of 18 economists.

"Obviously, the German economy suffered from the continuing recession in some European countries and from restrained growth of the global economy. The strong domestic demand could offset those factors only to a limited extent," Roderich Egeler, head of the Statistics Office, told a news conference.

Germany has proved a pillar of strength throughout the euro zone crisis, but growth slowed to 0.7pc in 2012 and the economy skirted recession at the start of 2013, before picking up steam from the second quarter on.

Economists expect the German economy to crank up a gear this year, forecasting growth of between 1.2pc and 2pc thanks partly to rising domestic consumption and an expected recovery in investment by German companies.

"The German economy is running on all four cylinders, not just two anymore," said economist Joerg Kraemer of Commerzbank.

Excluding 2009, when the German economy suffered its biggest retraction of the post-war era, shrinking by 5.1pc, 2013 was the weakest since 2003 when Germany was dubbed the "Sick Man of Europe".

That prompted then-Chancellor Gerhard Schroeder to unveil far-reaching reforms of the welfare state, which are now being diluted by the new right-left coalition of Angela Merkel's conservatives and the Social Democrats (SPD).

"We're expecting growth in 2014 of 2.2pc. But there are risks out there," said Berenberg economist Christian Schulz, citing Germany's continuing vulnerability to a resurgence of the euro zone crisis.

Foreign trade, which had underpinned growth for the previous three years, took 0.3pc off GDP last year but economists expect trade to support the economy this year as growth in Germany's key trading partners picks up.

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