German economy accelerated in 2016 thanks to higher spendingJanuary 12, 2017 10:08am

BERLIN (AP) — Germany's economy accelerated slightly last year to grow by 1.9 percent, narrowly beating expectations thanks largely to household and government spending, official data showed Thursday.

The figure released by the Federal Statistical Office was slightly better than Germany's performance in the previous two years, and also a bit above the 1.8 percent growth that the government and economists had forecast. Gross domestic product increased by 1.7 percent in 2015 and 1.6 percent in 2014.

The statistical office offered a rough estimate that the economy grew by about half a percent in the fourth quarter compared with the previous three-month period. However, an official fourth-quarter figure won't be released until next month, and statisticians warned that the estimate should be treated with caution.

Domestic spending once again powered the economy, which is traditionally export-heavy, to stronger growth.

Household spending was up 2 percent last year and government consumption spending 4.2 percent, the latter partly a result of spending to deal with the previous year's large influx of asylum-seekers. Investment in construction was up 3.1 percent and spending on equipment such as machinery and vehicles rose 1.7 percent.

Foreign trade had a slightly negative impact on GDP as a 3.4 percent rise in imports outpaced a 2.5 percent increase in exports.

Germany has now enjoyed seven consecutive years of economic growth, a contrast with weak performances in many other European countries. That has translated into healthy government finances.

The country had a 19.2 billion-euro ($20.2 billion) budget surplus last year, or 0.6 percent of GDP. That was the third consecutive annual fiscal surplus, down slightly from the previous year's 0.7 percent.

Of the 18 other eurozone countries, only Estonia and Luxembourg are expected to have produced a surplus last year, statistical office head Dieter Sarreither said.

"Despite the stock market crash in China, Brexit, Turkey, Trump and Italy, the economy performed its best growth year since 2011," said ING-DiBa economist Carsten Brzeski. "Strong domestic demand has shielded the German economy against most external risks."

He argued that the biggest risk is complacency, and that Germany urgently needs structural reforms along with stronger investment — but "it is very unlikely that it will get any of these before the elections" expected in September.

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