Germany Keeps Momentum Showing Resilience to Global Turmoil

  • Fourth-quarter GDP rises 0.3%, matching pace of prior quarter
  • Euro-area GDP due at 11 a.m., economists predict 0.3% growth

European Bank Rout Deepens

Germany’s economy sustained its momentum at the end of 2015, showing resilience amid an emerging-market slowdown that’s heightened concerns about global growth and sent equities plunging this year.

Gross domestic product rose a seasonally-adjusted 0.3 percent in the three months ended Dec. 31, matching the rate of the previous quarter, the Federal Statistics Office in Wiesbaden said on Friday. That’s in line with the economist estimates in a Bloomberg survey. The economy expanded a calendar-adjusted 1.5 percent in 2015.

German business confidence has fallen for the past two months, and a rout in global stocks has pushed Europe’s benchmark gauge to its lowest since 2013. Even with central banks around the world cutting interest rates and the European Central Bank considering adding to its stimulus, the heightened uncertainty is weighing on the prospects for Germany, the euro area’s largest economy.

“The German economy ended the year with a decent growth performance,” said Carsten Brzeski, chief economist at ING-Diba in Frankfurt. “2016 could be more challenging” as “on top of the well-known risk factors like slowing China and emerging markets or a still-struggling eurozone, low oil prices and the possible weakness of the U.S. economy could give the German economy a hard time.”

Fourth-quarter growth was driven by domestic demand, with government spending increasing “significantly” in response to the refugee crisis, according to the report. Investment, particularly construction, also improved while trade was a drag on the economy as exports slowed more than imports.

Domestic demand was supported by the slump in oil and inflation that stayed weak despite the ECB’s expanded stimulus program. German unemployment is at a record low and real wages rose 2.5 percent in 2015, the strongest increase since 2008.

Key for Region

At the same time, industry is showing signs of slowing, with production plunging 1.2 percent in December and a manufacturing gauge falling in January.

Even so, “the significant increase in orders from within the country and abroad, which is in line with an improved business outlook and the latest recovery in export expectations, signals that manufacturing is about to pick up pace,” the Bundesbank said in January.

Commerzbank AG, Germany’s second-biggest lender, on Friday reported fourth-quarter profit that beat analyst estimates. Still, the bank warned of a “challenging” year ahead “due to the geopolitical and macroeconomic environment.”

Global equities showed signs of respite on Friday after a turbulent week with European stocks opening higher after oil rose from a 12-year low. The Stoxx Europe 600 Index rebounded from its lowest close since September 2013 and Germany’s benchmark DAX index increased 1.2 percent to 8,854.55 at 10:02 a.m. in Frankfurt.

“Germany is not as dependent on global demand as it used to be,” Johannes Mayr, senior economist at Bayerische Landesbank in Munich, said ahead of the report. “Private consumption is now the most important driver of economic growth in Germany, and this is important news because it makes the German economy much more robust against problems in the global economy.”

Germany’s economic upswing is key for the continuation of the euro-area recovery amid slower global growth. Growth figures for the 19-nation currency bloc are scheduled to be published by Eurostat at 11 a.m. in Luxembourg, with economists in a separate Bloomberg survey predicting expansion held at 0.3 percent. France, the region’s second-largest economy, said in January that expansion slowed to 0.2 percent.

Italy, the region’s third-largest economy, expanded 0.1 percent in the fourth quarter, falling short of economists’ expectations and at the slowest pace in a year. The data may prompt concerns that the recovery from the country’s longest recession since World War II might falter in coming months.

Before it's here, it's on the Bloomberg Terminal.