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Frankfurt / AFP
Strong foreign trade and buoyant consumption drove Germany’s economy, Europe’s largest, to better-than-expected growth in the second quarter, federal statistics office Destatis said on Wednesday.
Gross domestic product (GDP) grew by 0.4 percent between April and June, adjusted for seasonal, calendar and price effects — twice as fast as analysts surveyed by Factset predicted.
However, the final figure, which confirmed a preliminary Destatis reading earlier in August, represented a slow-down from the unexpectedly strong 0.7-percent expansion in the first quarter.
“Compared with the previous quarter, the positive impulses above all came from foreign trade,” Destatis said in a statement.
According to preliminary estimates, exports of goods and services increased by 1.2 percent between April and June, while imports fell by 0.1 percent.
Overall, the data showed “mixed signals” in the German economy.
Households increased spending by 0.2 percent and the state by 0.6 percent compared with the previous quarter. But business investment in capital goods fell by 2.4 percent and in construction by 1.6 percent.
Looking back at the previous year, the economy was 1.8 percent larger between April and June than the same period in 2015, adjusting for price and calendar effects — a slightly slower growth rate than the first quarter’s 1.9 percent.
In the coming quarters, “private consumption should remain an important growth driver on the back of low inflation, low interest rates, low unemployment and higher wages,” analyst Carsten Brzeski of ING Diba bank said, while Germany’s refugee crisis will continue to bolster state spending.
Investment remains “the economy’s Achilles heel,” he noted, adding that Chancellor Angela Merkel must produce “a clear vision for Europe” with other EU leaders to reassure investors in Germany.
Eastern Germany
‘economically anaemic’
Berlin/ AFP
Twenty-six years after reunification, eastern Germany remains economically anaemic with little prospect of catching up with the rest of the country by 2030, a study published on Wednesday said.
Of the eastern states, only “Saxony and Brandenburg will reach the level of overall average German growth” between 2015 and 2030, wrote Joachim Ragnitz of the Ifo economic think-tank.
The remaining federal states formed from the former territory of the German Democratic Republic (GDR), Mecklenburg-Western Pomerania, Thuringia, and Saxony-Anhalt, will by contrast reckon with “in parts extremely low growth rates”.
Eastern Germany’s GDP grew by 1.2 percent per year between 2010 and 2015, underperforming the 1.6 percent achieved by western Germany plus Berlin, Ifo calculated.
While Brandenburg benefits from its proximity to Berlin and Saxony boasts two attractive large cities in Dresden and Leipzig, the other “new states” face significant challenges.
The former GDR has seen a decades-long emigration of the young, exacerbating the ageing population problem due to low birth rates that affects all of Germany.
“Exactly the people with a high level of qualifications who could push increased productivity and innovation are lacking,” Ragnitz wrote.
As well as sapping the supply side of the economy with a brain drain, demographic weakness also undermines demand, as fewer people are around to spend in the local economy.
Meanwhile, Ragnitz noted that “large, structurally defining firms are largely lacking”, apart from subsidiaries of foreign firms, meaning “higher-value business functions are lacking and strategic decisions taken without taking east German interests into account.”
Most firms in eastern Germany remain small, concentrating on market niches — and are therefore “by definition notable for their limited opportunity to expand”.
Not one of the 30 leading firms listed on the DAX stock market index is based in the former GDR.
Ragnitz argues that public investment should be focused on improving small- and medium-sized firms’ competitiveness and make up for lacking private investment in research and development.
But both EU structural development funds and solidarity payments from wealthier western states are set to dry up in 2020.