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Exports, consumers and construction drive German growth surge
May 23, 2017 / 6:07 AM / 7 months ago

Exports, consumers and construction drive German growth surge

BERLIN (Reuters) - The German economy picked up steam in the first quarter helped by strong exports, booming construction and higher household and state spending, burnishing Chancellor Angela Merkel’s economic credentials as she gears up for national elections.

FILE PHOTO: FILE PHOTO: A Hapag Lloyd containership is loaded at the shipping terminal Altenwerder in the harbour of Hamburg, Germany August 15, 2016. REUTERS/Fabian Bimmer/File Photo/File Photo

Europe’s biggest economy grew 0.6 percent quarter on quarter, up from 0.4 percent in the final three months of last year, the Federal Statistics Office said on Tuesday, confirming a preliminary reading.

The final figures, continuing a run of solid economic data, show a broad-based upswing - good news for Merkel as she prepares to seek a fourth term in office on Sept. 24.

A poll published on Tuesday showed her conservative CDU/CSU bloc - which has been widening its lead over its Social Democrat rivals - and the pro-business Free Democrats winning enough seats to form a parliamentary majority together.

“The economic upswing has become more broad-based,” VP Bank economist Thomas Gitzel said. “Hopes are growing that this will become a self-reinforcing boom.”

The Statistics Office said exports rose 1.3 percent and imports edged up 0.4 percent, meaning net trade added 0.4 percentage points to gross domestic product (GDP) growth.

Investment in construction jumped 2.3 percent, the strongest increase in three years. A growing population, increased job security and record-low interest rates are fuelling a property boom in Europe’s biggest economy.

FILE PHOTO: FILE PHOTO: A Hapag Lloyd container ship is loaded at a shipping terminal in the harbour of Hamburg, Germany, March 25, 2017. REUTERS/Fabian Bimmer/File Photo/File Photo

Investment in machinery and equipment rose 1.2 percent, in a sign that companies are looking to expand despite political risks clouding the growth outlook.

German consumers are meanwhile benefiting from record-high employment, rising real wages and low borrowing costs, with rising household spending adding 0.2 percentage points to growth.

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State spending rose 0.4 percent, German authorities are spending billions of euros on accommodating and integrating more than one million refugees who have arrived since the start of 2015, many from war zones such as Syria and Iraq.

A change in inventories subtracted 0.4 percentage points from the overall GDP growth rate, the data showed.

“Even in its ninth year, the recovery is still going strongly. In fact, the recovery has broadened across all sectors,” said ING economist Carsten Brzeski, adding that there were no signs that momentum might be lost any time soon.

While Germany’s vibrant domestic economy was reflected in strong construction activity and continued strength in private consumption, private investments finally started to pick up too, he noted.

Even though the German government was trying to counter international criticism of a lack of investment, the discussion on how to further strengthen investments, particularly private sector investments, would clearly continue, he added.

Reporting by Michael Nienaber; Editing by Madeline Chambers and John Stonestreet

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