BERLIN: Germany’s economy picked up speed in the final quarter of 2016, a trend that is likely to be maintained in the first few months of 2017, putting Europe’s largest economy on a solid footing at the start of a key election year.
Germany’s economy grew at a quarterly clip of 0.4%, or 1.7% in annualized terms, the Destatis statistics office said Tuesday. The third-quarter estimate was trimmed to an annualized rate of 0.8%, but activity in the second quarter was slightly stronger than previously seen.
The pickup was led by domestic demand, as government spending increased “significantly” from the third quarter, the statistics office said. Construction investments were strong, too. Net trade, however, weighed on Germany’s fourth-quarter growth rate, as imports rose more than exports.
“Germany’s economic situation in 2016 was characterized by solid and steady growth,” Destatis said.
Over the course of 2016, Germany’s economy grew 1.9%, which marks the highest rate since 2011. Activity firmed despite a series of shocks to confidence, including the U.K.’s vote to leave the European Union and terrorist attacks in Germany, France and Belgium.
Economic growth is expected to remain robust this year, but economists caution that uncertainties about future trade relations with the U.K. and the U.S. and a risk of rising anti EU-sentiment ahead of key elections in Germany, France and the Netherlands could weigh on consumer spending and corporate investment.
A pickup in oil prices, meanwhile, propelled Germany’s inflation rate to its highest level since mid-2013. The annual inflation rate, measured according to harmonized European Union standards, rose to 1.9% in January from 1.7% in December, Destatis said in a separate publication, confirming preliminary estimates. It marks the highest rate since July 2013, bringing German inflation back in line with the ECB’s objective. The ECB aims to anchor eurozone inflation at just below 2%.
Rising inflation has already prompted calls from German economists and politicians for an end to a series of stimulus programs launched by the ECB, including a 2.3 trillion euro ($2.47 trillion) bond-purchase program that is due to run until the end of 2017 and possibly beyond.
Ive noted the US dollar gained against the yen in Asian trading, after Japanese economic growth was weaker than expected and after Trump’s weekend meeting with Japanese Prime Minister Shinzo Abe. The kiwi gained to 82.02 yen from 81.43 yen last week.
The local currency traded at 57.63 British pence compared with 57.49 pence in Asia on Friday and rose to 67.80 euro cents from 67.59 cents. It increased to 4.955 Chinese yuan from 4.9477 yuan. New Zealand’s two-year swap was unchanged at 2.3 percent while 10-year swaps fell 1 basis point to 3.42.