German GDP rose by 0.4% q/q in the fourth quarter of last year. The best thing about the details published today (see the press release here) was the (semi-) strong increase in spending on machinery and equipment of 1.4% q/q. That last occurred in 2011. Once the investment cycle starts, it usually goes on or a few quarters also creating jobs, as long as no major shocks happen. Private consumption shrank slightly as it was rather dull throughout the year. However, given declining real wages (-0.2%), that is not a big surprise.
Exports grew much more than imports, and inventories were a drag on growth. However, part of that will probably be revised away at a later stage. What is called “inventories” is most of all statistical error. There are just no good statistics on inventories for Germany.
Despite some risks, it looks good for the German economy. Real income is likely to rise by about 1% this year which leaves room for an expansion of private consumption by about the same order or magnitude. (Yes, I know, this has been said many times before…) Ultra- low interest rates will support the construction industry for a longer period of time. By the way, nominal GDP increased by 2.7% in 2013. That gives a rough indication about what an appropriate Bundesbank policy rate for Germany would be.
The gradual recovery in the euro area is good for exports and should also support spending on machinery and equipment, as uncertainty further decreases. Some leading indicators point to accelerating growth in the current quarter. Long out, net immigration to Germany eases pressure on capacities. The biggest risks are currently a marked weakening of important emerging markets and in terms of economic policy a government resting on its laurels.
GDP details for Q4 2013 (% q/q):
- GDP: 0.4 (Q3: 0.3)
- Private consumption: -0.1
- Government consumption -0.0
- GFCF in machinery and equipment: 1.4
- GFCF in construction: 1.4
- Exports: 2.6
- Imports: 0.6
Contributions to quarterly GDP growth:
- Final domestic uses: 0.1 %points
- Changes in inventories etc.: -0.8 %points
- Net exports: 1.1%points
Nordea