German Trade Boosts Economic Growth as Political Risks Rise

Updated on
  • Economy expanded 0.8% in third quarter, matching estimate
  • Failed coalition talks raise specter of new elections

Merkel Is Damaged But Will Survive, Schmieding Says

Exports and investment propelled German growth in the third quarter, putting Europe’s biggest economy in a strong position to weather rising political uncertainty after coalition talks collapsed.

Trade added 0.4 percentage point to economic expansion in the July-September period, with company spending on equipment contributing 0.1 percentage point, the Federal Statistics Office in Wiesbaden said on Thursday. Growth domestic product increased 0.8 percent -- in line with a Nov. 14 estimate -- putting the economy firmly on course for its best annual performance in six years.

“We should expect the German economy to sustain its momentum,” said Natascha Gewaltig, an economist at Action Economics U.K. Ltd. in London. “External demand should also stay strong and companies are likely to continue investment in equipment as they are running into capacity constraints.”

A composite Purchasing Managers’ Index rose to 57.6 from 56.6 in October, IHS Markit said in a separate report. New orders surged the most in more than 6-1/2 years, leading companies to add jobs at one of the fastest rates in at least two decades.

Economists surveyed by Bloomberg have lifted their forecast for 2017 German growth eight times since the start of the year to currently 2.2 percent, and the Bundesbank predicts that full order books and business confidence at a record high will continue to underpin the upswing. Yet, the failure of Chancellor Angela Merkel to form a governing coalition has cast a shadow over the outlook.

After a month of negotiations, the Free Democrats walked out exploratory talks on Sunday, leaving the country in political limbo and raising the prospect of new elections. German President Frank-Walter Steinmeier has urged all political groups to put responsibility to the nation ahead of party interests.

Government consumption was unchanged in the third quarter from the previous three months, while private spending declined 0.1 percent, according to the report. Company investment in equipment rose 1.5 percent. Exports were up 1.7 percent, compared with a 0.9 percent increase in imports.

A breakdown of GDP components for the euro area will be published on Dec. 5. The 19-nation economy expanded 0.6 percent in the third quarter and is headed for its best annual performance in a decade.

— With assistance by Kristian Siedenburg, and Andre Tartar

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