* Domestic economy sends "mixed signals" - stats office
* Domestic demand seen as growth driver for 2014
* German gov't achieves surplus for second straight year
By Michelle Martin
BERLIN, Feb 25 Foreign trade propelled growth in
Europe's largest economy in the fourth quarter while domestic
demand, which had been a key growth driver throughout the rest
of the year, was a drag.
Seasonally-adjusted data from the Federal Statistics Office
on Tuesday confirmed an earlier flash estimate showing German
gross domestic product (GDP) increased by a modest 0.4 percent
on the quarter between October and December compared with 0.3
percent during the previous three months.
A detailed breakdown showed domestic demand subtracted 0.7
percentage points from growth while foreign trade, which had
been weak for much of 2013, added 1.1 percentage points to GDP.
The statistics office said the domestic economy sent "mixed
signals". Capital investment picked up significantly, big
inventory reductions slammed the brakes on growth and public
expenditure was stagnant while private consumption dipped.
Recent sentiment indicators have been upbeat but hard data
has been more subdued, raising doubts about the strength of the
economy's actual performance.
But economists expect domestic demand to gain momentum this
year and Berlin is relying on it to drive a predicted 1.8
expansion while foreign trade is expected to dampen growth.
"High job security and rising incomes as well as very low
inflation have been boosting consumer confidence to record highs
lately and should translate into stronger household spending
growth in 2014," said Christian Schulz at Berenberg Bank.
"The sharp fall in inventories may even trigger a
bounce-back in the first quarter of 2014 if inventories are
replenished," he added.
Last week data showed real wages in Germany fell in 2013 for
the first time in four years but Nordea economist Holger Sandte
said real income was likely to develop more positively this year
so there was a good chance private consumption would pick up.
Workers are expected to get strong wage hikes and benefit
from record employment levels and moderate inflation, while low
interest rates give them little incentive to save.
The Economy Ministry has said it expects private households
to spend considerably more on consumption and home building this
year due to those favourable conditions.
The German economy was a growth locomotive during the early
years of the euro zone crisis but its performance has weakened
over the last two years, and in 2013 it grew at its slowest pace
since the global financial crisis.
Recent surveys have shown increases in consumer and business
morale, suggesting the economy will gather speed in early 2014.
But the latest hard data has painted a more gloomy picture,
with exports, industrial output and orders all falling in
December. That has prompted some economists to warn that the
economy is not faring as well as the forward-looking "soft"
The data confirmed an earlier flash estimate showing
Germany's gross domestic product was up 1.3 percent on the year
in the fourth quarter.
Separately, the statistics office said on Tuesday that the
German federal, state and municipal governments together
achieved a surplus of 0.3 billion euros last year - equivalent
to 0.0 percent of its GDP.
It therefore comfortably met the Maastricht criteria that
say euro zone countries are supposed to have deficits of no more
than 3 percent of GDP.