German economic upswing continues

An employee of a steel manufacturer at work

The German economy grew strongly in the past year. Real gross domestic product (GDP), according to initial calculations by the Federal Statistical Office, was up by 1.7% from 2014. Economic output therefore matched the level forecast by the Bundesbank in June 2015. The German economy accelerated at a similar clip in 2014, at 1.6%.

Consumption was the key engine of growth. According to the Federal Statistical Office, households increased their consumer spending by a price-adjusted 1.9% on the year. Government consumption expenditure was up by 2.8%. Investment picked up as well: Domestic investment by the corporate and public sectors in machinery, vehicles and other equipment was up by 3.6% in real terms from 2014; construction increased slightly by 0.2%.

German foreign trade likewise experienced dynamic growth in the past year. Exports of goods and services were up by 5.4% after price adjustment. Since, over the same period, imports increased by a similar margin of 5.7%, net foreign trade thus made a relatively small contribution (0.2 percentage point) to economic growth.

Perceptible increase in production

Looking at each individual sector of the economy, it was particularly the production sector (excluding construction) which made a meaningful contribution to growth in 2015. The services also performed strongly. 

Outlook remains positive 

The Bundesbank believes that economic growth, which was supported by, above all, domestic demand, will continue. In their December 2015 semi-annual projection, the Bundesbank’s economists are expecting real GDP growth of 1.8% for 2016. They expect the economy to expand by 1.7% in 2017.