BERLIN: Germany’s economy more than doubled its expansion rate in the first quarter as spending picked up, cementing its role as the growth engine for a region in which the effects of high-powered monetary stimulus appear to be gaining traction.
The eurozone’s dominant economy grew 0.7 percent, its strongest quarterly rate since an identical reading in the first quarter of 2014 as higher state and household expenditure more than offset a dip in foreign trade, the Federal Statistics Office said yesterday.
The figure beat forecasts as well as a preliminary growth rate of 0.5 percent in the currency bloc as a whole announced by European statistics agency Eurostat in Brussels.
Separate national GDP data published yesterday showed quarterly growth accelerated to 0.3 percent in Italy and to 0.5 percent in the Netherlands.
For the German economy, private consumption has overtaken trade as the most important growth driver, with record-low unemployment, low interest rates and higher wages pushing households to spend more.
Also yesterday, Germany’s biggest trade union, IG Metall, said it agreed a two-stage wage increase of 4.8 percent over 21 months, which analysts said should further boost consumption.
Investment in construction and capital goods rose, the statistics office said, boosted by relatively mild winter weather that had a similar impact in some other eurozone countries, while Europe’s migrant crisis also played a role.
“It is likely that higher public expenditure contributed to growth in a number of countries, in some cases lifted by spending to deal with the influx of refugees,” Howard Archer, chief European economist at IHS, said of the Eurostat data.
Policy-makers at the European Central Bank said the investment jump was unlikely to be a blip, supporting the bloc’s slow but steady recovery.
Buying 1.7 trillion euros (US$1.9 trillion) worth of assets and cutting rates into negative territory, the ECB has pushed down borrowing costs for governments, businesses and households, hoping to kick-start spending to generate growth.
