German economy expected to continue expansion in last quarter: finance ministry

DEC 18, 20157:38 AM

[BERLIN] Germany's economy is expected to continue on its robust expansion path at the end of this year, driven by upbeat business sentiment and a stable labour market, despite a cooling in emerging markets, the Finance Ministry said on Friday.

In its December monthly report, the ministry said private consumption, which was the country's pillar of growth this year, was boosted by dynamic developments in the industrial and services sectors as well as continued hiring and wage increases.

While a slowdown in emerging markets did not seem to deter Europe's biggest economy throughout 2015, the ministry cautioned similar expectations for next year. "Foreign trade indicators point to a less dynamic export development in the coming months," it said.

Already in the third quarter, weak demand from abroad led to a subtraction of net foreign trade by 0.4 per centage point from German GDP - its weakest contribution in two years.

But the finance ministry expects domestic demand, helped by low inflation, to compensate for sluggish trade and points to significant expansions in Germany's services sector and a positive mood among industrial businesses in the last quarter.

Thursday's business climate index by Munich-based Ifo institute showed business morale slightly dipping in December, with some analysts warning of growing uncertainties among German consumers due to a record influx of refugees.

But overall, optimism among German managers about future business remained unchanged at the highest level since May 2014 in Ifo's monthly survey, underlining the finance ministry's positive expectations.

Germany's economy grew by 0.3 per cent in the third quarter after expanding 0.4 per cent from April to June.

REUTERS