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Germany ups growth, good news for Merkel

Friday, May 12, 2017 - 01:52

Germany's economy picked up speed in the first quarter of 2017, driven by higher investment in construction, machinery and equipment, as well as robust household and state spending, and strong exports. David Pollard reports.

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A 0.6 per cent jump in Q1 GDP is Germany's best performance in a year. And could, say analysts, put it into top gear. Just as the euro zone too has revised up its growth outlook. The bloc as a whole now expected to hit a rate of 1.7 per cent this year - as Germany did in the last quarter. Some worried that it could be going too fast - while others not. SOUNDBITE (English) CITY INDEX MARKET ANALYST, KEN ODELUGA, SAYING: "We know that their economy is very adaptive ... compared to many other major economies around the world. So whilst I would say that it's looking impressive I would not be very concerned about the risk of overheating too soon." It's vindication, say fans of QE, of the ECB's massive 2.3 trillion euro stimulus programme. If critics say it should be eased back. But according to ECB chief Mario Draghi this week: 'it's too early to declare success.' According to his deputy, Vitor Constancio: 'loose policy for longer is less risky'. Though a policy shift is perhaps not that far away. SOUNDBITE (English) CITY INDEX MARKET ANALYST, KEN ODELUGA, SAYING: "I think that we're still in this sort of balancing act phase .... I think the ground is being prepared in other words for the time when we do get that pretty clear signal." And other euro zone economies do still lag. France with just a 0.3 per cent growth rate in Q1. Italy forecast at just 0.2 per cent. SOUNDBITE (English) CITY INDEX MARKET ANALYST, KEN ODELUGA, SAYING: "We're still on shaky ground. I think there's a few success stories. We need to see more. For Germany, a bigger economy doesn't necessarily mean bigger investment. Its finance minister ruling out extra spending when he spoke on Thursday. But making some room - for tax cuts. (SOUNDBITE) (German) GERMAN FINANCE MINISTER, WOLFGANG SCHAEUBLE, SAYING: "A moderate relief of small and middle incomes is possible and appropriate." Good news for German households - and for the German chancellor and her governing party as they head towards a federal election in September.

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Germany ups growth, good news for Merkel

Friday, May 12, 2017 - 01:52