The final revised GDP figures from Germany showed that the economic activity in the region rose 0.8% in the three months leading up to the end of September. This was higher than previous estimates which showed a 0.6% increase.
Following the release of the GDP data, the euro currency rose over 1.1% on Tuesday of last week. Economists were expecting to see no changes to the GDP figures at all.
ZEW Economic Sentiment Index inches higher
The higher than expected GDP numbers came as the report from ZEW institute also indicated that investor morale improved in November. The report detailed that the prospects for the economy remained “encouragingly positive”, attributing this to high levels of growth across Europe and firmer overseas trade.
The economic sentiment index was seen rising to 18.7 in November, up from 17.6 in October. A separate gauge of investor’s assessment of the economy showed an increase in the index from 87.0 to 88.8 in November.
German third quarter GDP revised higher
The GDP revision came at a time when German employment was seen at an all time high while the pace of inflation was rising at a moderate pace. The easy monetary policy by the ECB also helped to keep borrowing costs low.
Higher tax revenues and budget surplus began rising as a result. The third quarter GDP data demonstrated all round growth. In comparison to last year’s data, German GDP growth registered a 2.3% increase in the three months leading to the end of September. This was slightly higher than the EU commission’s forecasts.
German authorities have however put a conservative forecast of 2.0% GDP growth this year and 1.9% GDP growth next year.
When adjusted for calendar effects, data indicates that the GDP growth rate increased 2.8% in the three months leading to the end of September. In comparison, the previous quarter saw an increase of just 2.3%. There were also revisions to previous reports with the first quarter GDP revised from 0.7% to 0.9%.
The German statistics agency, Destatis states that the third quarter GDP numbers are the highest recorded since 2014. Most of the contribution to the GDP came from higher net foreign trade exports which were seen rising sharply compared to imports.
State and household consumption remained at the same level in comparison to previous quarters however, gross capital investment contributed to the overall GDP growth.
The upbeat GDP numbers give an expectation that the fourth quarter GDP will also rise, keeping with the momentum.
EU Commission forecasts strong German growth
The most recent EU economics forecasts released showed that growth in Germany is expected to remain strong. According to the forecasts, high domestic demand and robust world trade were expected to contribute to the growth. For 2017, the EU commission forecasts German growth to average around 2.2% and around 2.1% in 2018.
The forecasts also show that German budget surplus was expected to rise to 0.9% of its GDP this year. In 2016, the budget surplus was registered at 0.8%. By 2019, according to the EU, the German debt is expected to fall to 60%. It also forecast that German current account surplus would narrow to 7.8% of GDP in 2017 and to 7.5% next year.
While the forecasts have remained mixed, with the German official forecasts coming in at the lower end, even in the worst case scenario the German economy is expected to end the year on a high note. Even in the event that growth becomes stagnant in the fourth quarter, German GDP is expected to close the year at a 2.4% annual GDP growth rate.
The high levels of employment and consumer spending is expected to eventually help push consumer prices higher as well.