Germany: GDP growth ticks up in 2015 as buoyant consumption offsets sluggish investment and external sector
January 14, 2015
According to a preliminary estimate from the Federal Statistics Institute (Destatis), GDP expanded 1.7% in 2015. The reading marked a slight uptick compared to the 1.6% expansion registered in 2014 and represents the fastest GDP growth since 2012. The figure is still subject to revision; and more detailed data for 2015 including the Q4 results, will be released on 12 February.
The economy’s slight acceleration last year came on the back of surging private and, albeit to a lesser extent, public consumption. However, fixed investment weakened and the external sector performed worse than in the previous year. Private consumption remained the main pillar of GDP growth, speeding up from 2014’s 0.9% rise to an outstanding 1.9% in 2015, marking the fastest expansion in 15 years. Growth in government spending surged from 1.7% in 2014 to a sizable six-year high of 2.8% in 2015. Conversely, fixed investment growth slowed from 2014’s 3.5% to 1.7% last year.
Exports of goods and services increased 5.4% in 2015, which marked a pickup over 2014’s 4.1% increase. At the same time, imports growth accelerated from 3.7% in 2014 to 5.7% in 2015. In fact, exports and imports both recorded their fastest expansions in four years. Given that imports’ growth outpaced exports’ growth, the external sector’s net contribution to overall economic growth fell from 0.4 percentage points in 2014 to 0.2 percentage points in 2015.
While exports have traditionally been Germany’s main motor of growth, private consumption has surpassed exports as contributor to GDP growth since 2013. Last year’s remarkable surge in private consumption was fueled by rising wages, record high employment, low inflation and the ECB’s expansionary monetary policy. Adding to this, public spending turned into the second most-important growth driver in 2015. Last year’s surge in government consumption was partly related to the influx of an estimated 1 million refugees, as the government had higher expenses to meet the needs of the newly arrived immigrants and for integration measures. According to the Economy Ministry’s recent Annual Economic Report, the government made more than EUR 6 billion for spending on refugees available for 2015 and 2016. On top of this, the budget for 2016 envisages an additional spending of EUR 3.9 billion for migration-related issues. In the government’s view, public spending will likely remain “dynamic” in 2016, due to the immigration of refugees. Besides higher state spending, to what extent the strong influx in refugees will impact the German economy in the medium to long term will depend on many aspects, including the access to and integration in the labor market.