German September Tax Revenue Climbs as Growth Picks Up

German tax revenue rose in September as the pace of economic expansion quickened, the Finance Ministry said, cautioning at the same time that growth is set to slow in the fourth quarter.

Tax collection rose 4.2 percent last month from a year earlier, led by intake at the level of Germany’s 16 states, the ministry in Berlin said in its monthly report today. Revenue in the first nine months rose 5.6 percent from a year earlier.

“There was likely an increase in overall economic activity in the third quarter,” the ministry said. The final quarter will probably see “a clear economic weakening,” mainly due to stagnation and recession in some euro-area economies, it said.

While there are signs that the sovereign debt crisis is damping growth, the German economy, Europe’s largest, is still outperforming its euro-area counterparts. German investor confidence gained for a second month in October, buoyed by the European Central Bank’s announced bond-purchase program.

Revenue from income and sales tax posted “surprisingly high gains” in September, the report said. The figures confirm the ministry’s expectation that the economy’s expansion will be mainly driven by consumer spending, it said.

German wages will grow a 0.3 percent in real terms this year, while pay will decline 0.5 percent in the 27-member European Union, the labor union-affiliated WSI institute said on its website. The unemployment rate has held at a two-decade low since December as companies including Bayerische Motoren Werke AG expect to achieve record sales in 2012.

Deficits Shrinking

The euro region is reversing the trend of “increasing macroeconomic imbalances” that existed before the crisis, Deputy Finance Minister Thomas Steffen said in a comment with the report. Current account deficits are shrinking “quickly,” Steffen said, urging governments to stay the course.

“The achievements made so far suggest that we should stay on the chosen path, although a good bit of the journey to overcoming the debt crisis still needs to be traveled,” Steffen said. “It would be tragic to change the direction now. Budget deficits would rise again and confidence that is slowly gaining would again be threatened.”

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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