German growth led by domestic economy as Eurozone demand falters

Fresh data has revealed the German economy has not been able to maintain the momentum it experienced in mid-2013.

The National Statistics Office (Destatis) reported on Friday that the nation’s gross domestic product (GDP) grew marginally in quarter-three, due to weakened exports to the Eurozone and emerging markets.

Nevertheless, the stable rise in domestic demand drove a 0.3% expansion in the German economy in quarter three, confirming an estimate giving on the 14th of November.

This is down from 0.7% growth in quarter two.

The stats

Capital investment grew to 1.6% in the three months leading up to September from the prior quarter, according to the data.

In addition, construction increased 2.4%.

Germany is relying more on its domestic economy as the euro area, its largest export destination, experiences weakened demand and the emerging markets show signs of a slowdown.

Growth in the 17-nation EU currency bloc nearly stalled in quarter three, as the French economy shrank without warning and a record-long recession continued in Italy.

Trouble in Brussels

Ironically, Germany’s growth was hampered at a time when the country is being heavily criticised by America and some European partners for its large trade imbalance.

The International Monetary Fund (IMF) and the US Treasury have both noted the nation is hampering European and global growth by placing too much emphasis on exports.

These concerns led European Union regulators to launch a probe on Germany’s trade surplus, as revealed on the 13th of November.

Yet as Friday’s analysis shows, net trade was 0.4% lower from third-quarter growth.

In response, the German Economy Ministry claimed criticism was “not justified” on the 31st of October, and Germany’s Chancellor Angela Merkel said it would be “absurd” to either force German companies to reduce their production or cut back on quality.

Carsten Brzeski, one of ING’s Senior Economists, noted “with today’s data the latest criticism on the German growth model looks a bit like crying over spilled milk.”

He continued, “the often called for rebalancing of the economy is already taking place.”


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