Mixed signals from Germany as ZEW index rises but GDP growth slows down

German investors are facing growing uncertainty, amid reports that quarterly GDP growth has halved in the third quarter, yet the monthly ZEW index still reflects cautious optimism.

The pace of German GDP growth slowed down from 0.7% in the first and 0.4% in the second to 0.2% in the third quarter of 2016, according to the latest data released by German Federal Statistics Office Destatis.

Positive contributions were made by domestic final consumption expenditure, while weak foreign trade data had a downward effect on growth, consequently, imports increased gradually while exports showed compared to the previous quarter.

According to Destatis, the price-adjusted GDP was up by 1.5% in the third quarter of 2016 (1.7% when calendar-adjusted), following a 3.1% increase in the second quarter and a 1.5% increase in the first quarter of 2016.

Despite these mixed signals, optimism among German investors appears unabated, with the monthly ZEW index for the German economy rising by 7.6 basis points to 13.8 basis points, driven by solid growth forecasts for the Chinese and US economy.

“The ZEW growth forecast has increased for the fourth time in a row” comments ZEW president Achim Wambach, adding that “..the renwed increase points to stronger economic growth levels over the coming six months. Nevertheless, the election of Donald Trump as US president and the subsequent emergence economic and political uncertainties have left their mark. Economic reports in the aftermath of the US elections were significantly less positive than those before.”

ABOUT THE AUTHOR
Mona Dohle
Mona Dohle speaks German and Dutch and is DACH & Benelux Correspondent for InvestmentEurope.

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