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German growth best in five years, but can it last?

Thursday, January 12, 2017 - 01:44

The German economy expanded by 1.9 percent in 2016, the strongest rate in five years and an improvement on the previous year, a preliminary estimate from the Federal Statistics Office shows. But, as David Pollard reports, some fear it may not last.

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It's known for being careful with its cash, but even for Germany there can be exceptions. Hamburg's new concert hall seven years over deadline - ten times over budget. At the very least this maritime-themed statement is sailing sunny waters. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "With unemployment being amongst the lowest in the euro zone and with the economic industrial output for example earlier in the week looking pretty strong, Germany looks as though economically it's in a fairly good place." At 1.9 per cent last year, GDP was at its brightest in half a decade. A 6.2 billion euro budget surplus meant a third year with no government borrowing. State spending was still up - private consumption as well, by two per cent. Brexit, Trump and other trade worries doing little to darken the mood, yet. SOUNDBITE (English) OANDA SENIOR MARKET ANALYST, CRAIG ERLAM, SAYING: "German consumers are going to be continue to be buoyed by what we're seeing as opposed to put down but I think the global risks are clearly growing around us and there is potential there for that to dry up quite quickly." But ECB asset purchases might also dry up in 2017, according to some economists. Not the strength of Germany - but the lagging weakness of some others in the euro zone - the challenge. SOUNDBITE (English) OANDA SENIOR MARKET ANALYST, CRAIG ERLAM, SAYING: "We are seeing these reflationary policies in Germany which could create some issues for the European Central Bank. Where some economies need lower rates, Germany potentially needs higher ones." Much of the success of Europe's biggest economy comes from a low single currency. A euro pushed upwards by rate hikes not something that'll play well with Germany's powerful exporters ....

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German growth best in five years, but can it last?

Thursday, January 12, 2017 - 01:44