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German economy expanded 1.5% in 2015; fiscal surplus came in at 0.5% of GDP

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 14, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Mumbai) - Official data released today showed German GDP increased by 1.5% in 2015, dropping slightly from 1.6% growth recorded in 2014. If the working day adjustments are subtracted then the German GDP will show 1.7% increase. German statistical office releases GDP data for the past year before releasing fourth quarter data. The German fourth quarter GDP growth figures are yet to be released. But the 2015 yearly growth figures released today indicates the German economy likely grew by 0.4% quarter on quarter in Q4. However, Q4 growth might be less than the estimated 0.4 per cent given that the vacation period towards has probably have had a negative impact production in December. Also, the first estimate of Germany’s 2015 fiscal balance heightens the possibility of an extremely weak German public investment.

    There is some good news as well. The German government recorded a fiscal surplus in two consecutive years for the first time since 1961. The statistical office reported fiscal surplus stood at 0.5% of GDP in 2015, compared to 0.6% of GDP registered in 2014. The federal fiscal surplus came in at 12bn euro higher than the initially estimated 5bn euro. The government had declared earlier that any surplus from the 2015 budget would be transferred to 2016’s budget and not be used to pay off government debt. Germany can now look to use the extra funds to fund its policy of supporting refugees. The government estimates 8bn euro will be required to accommodate refugee related costs.

    Today’s 2015 GDP data makes it evident that Germany has had another fulfilling year with respect to achieving its economy goals. German economy managed to combat headwinds that surfaced in the form of Greek crisis, emerging market slowdown led by China and other geopolitical uncertainties and stick to its recovery path. The economy witnessed rebalancing as focus shifted from the previously significant manufacturing and export sector to private consumption, which currently is the primary growth.

    Consumption and services can be expected to remain strong this year as well; while industrial production and exports will continue to be sluggish. Consumptive stimulus from the refugee inflow as well as rise in government consumption should work to raise the overall consumption level in the economy which thus stands to gain from demand growth. The economy will further receive support from low interest rates, low inflation and high employment. Things however do not look that bright with respect to growth in the industrial sector. High inventories and smaller growth in new orders will hurt manufacturing activity. On the other hand weak global outlook will impact the exports growth

    Though today’s data signified strength in the German economy, it is hard to miss the underlying facts that might not seem so pleasing to the policy makers. In the past years, Germany performed exceptionally well at least when compared to its other euro zone peers. Last year, however the growth has not really been stellar; its growth rate has hardly beaten the figures of other countries in the bloc. Also, there are uncertainties with respect to the way forward. Unless new structural reforms are implemented and more investments are brought in, there seems little possibility of further growth.
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