Germany: External demand boosts economic growth in Q4
February 25, 2014
In the third quarter, GDP increased a seasonally-adjusted 0.4% over the previous quarter, according to more complete data published by the Federal Statistics Office (Destatis). The reading, which matched the preliminary estimate, came in above both the 0.3% expansion observed in Q3 and the 0.3% increase the market had expected. Compared to the same quarter of the previous year, GDP increased 1.3%, which was above the 1.1% expansion registered in the previous quarter.
The external side of the economy was mainly responsible for the improvement observed in Q4. Exports of goods and services increased 2.6% in Q4, which was well above the 0.2% expansion observed in Q3. Import growth weakened from a 0.8% increase in Q3 to a 0.6% expansion in Q4. Consequently, the external sector's net contribution to overall economic growth swung from minus 0.3 percentage points in Q3 to plus 1.1 percentage points in Q4, which marks the strongest contribution since Q4 2009.
Domestic demand did not improve notably in Q4. Private consumption decreased 0.1% over the previous quarter, which contrasted the 0.2% expansion observed in Q3. Moreover, growth in government spending was unchanged in Q4 and was below the 1.2% increase recorded in Q3. Meanwhile, gross fixed investment was the only driver of growth; it expanded 1.4% in Q4, faster than the 1.3% increase tallied in Q3.
In the full year 2013, the economy expanded 0.4%, which marked a deceleration over the 0.9% expansion observed in 2012.
For 2014, the Bundesbank expects economic activity to increase 1.7%. For 2015, the Bank sees economic growth picking up to 1.8%. Meanwhile, in its annual economic report, the federal government expects the economy to expand 1.8% this year, which is up from its previous 1.7% estimate. FocusEconomics Consensus Forecasts panelists' projection is broadly in line with the Bundesbank. They expect economic activity to expand 1.7% in 2014, which is unchanged from last month's forecast. For 2015, the panel forecasts that GDP will accelerate to 1.9%.
Author: Ricardo Aceves, Senior Economist