German fourth-quarter growth steady but unspectacular as foreign trade drags

[February 12, 2016]  By Caroline Copley

BERLIN (Reuters) - Germany posted steady economic growth in the final quarter of 2015, as higher state spending boosted by the refugee crisis and significantly more construction offset a drag from foreign trade, the Federal Statistics Office said on Friday.

The economy grew by 0.3 percent in the final three months of 2015, in line with the consensus forecast in a Reuters poll and at the same rate as in the previous quarter.

The overall growth rate for 2015 was 1.7 percent.

Unadjusted data showed the economy expanded by 2.1 percent on the year in the fourth quarter, falling short of the consensus forecast for 2.3 percent growth.

"Slow but steady was the retrospective motto for 2015," said VP Bank Group Chief Economist Thomas Gitzel, describing fourth quarter growth as "not exhilarating" but also not a reason to worry.

The statistics office said more was invested in construction compared to the previous quarter while foreign trade acted as a brake on growth.

After a solid first half of 2015, the economy slowed slightly in the second half as market turmoil in emerging markets and the Chinese slowdown left their mark.

The steady reading follows on from surprisingly poor industrial output data for December that underlined the challenges facing Germany's traditionally export-driven economy this year after the slowdown in emerging markets.

CONSUMERS

Private consumption has overtaken trade as the most important growth driver for the German economy, with record-low unemployment, low interest rates and higher wages loosening consumers' purse strings.

While state spending rose significantly in the final three months of the year, private consumption increased only slightly.

A slump in the European financial sector that has hammered shares this week in Deutsche Bank <DBKGn.DE>, Germany's biggest lender, has raised concerns that market volatility may spill over into the real economy.

ING economist Carsten Brzeski said 2016 could prove more challenging for the German economy due to the refugee crisis, political uncertainty and increasing external headwinds.

"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," he said.

The German government last month revised down its growth forecast for 2016 to 1.7 percent.

(Additional reporting by Joseph Nasr; Editing by Gareth Jones)

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