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Consumers fuel Germany's recovery

Tuesday, February 24, 2015 - 02:04

A consumer spending revival in Germany is propelling strong growth in Europe's largest economy. As Katie Gregory reports there's no sign of a slow in spending with a significant trade union wage deal seeing pay increases for millions of workers - meaning more cash to burn.

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The nation of savers - is now spending... and at a rapid rate. Consumers are fuelling Germany's recovery - with Q4 GDP data showing the economy grew by 0.7%. Morale is at its highest rate in 13 years - boosted by low oil prices, a strong job market and low interest rates. Arthur Brunner is from ICF Kursmakler. (SOUNDBITE) (German) TRADER AT ICF KURSMAKLER, ARTHUR BRUNNER, SAYING: "So we have had a very strong final quarter, in comparison with last year we finished up 1.4%, in comparison with the previous quarter 0.7%, and so that shows that the German economy is in a very good state." Another good sign of that state - an increase in purchases of machinery and vehicles. Building investment also on the rise, boosted by growth in residential and public construction. And there's more money for workers on the way. IG Metall the country's largest trade union has agreed to a 3.4% wage increase for one year from April - that's almost three times higher than inflation. And workers will also get a 150 euro one-off payment. But ETX capital's Joe Rundle says companies need to be wary. (SOUNDBITE) (English) ETX CAPITAL, HEAD TRADER, JOE RUNDLE, SAYING; "You're going to get a wage increase in the German unionised section which is really going to increase the standard of living for Germany. But it will put some pressure on German companies, they do have the room to manoeuvre at the moment and it will probably cause a little blip in German GDP in the short to medium term." Once described as the "sick man of Europe" - German consumers aren't just proving the cure for their own country at the moment - they are also boosting the euro zone. (SOUNDBITE) (English) ETX CAPITAL, HEAD TRADER, JOE RUNDLE, SAYING;, "Germany spending more money is a good thing, Germany growing is a good thing. You know ultimately there should be some form of transfer into southern Europe and maybe some debt relief." The German government is expecting the economy to grow by 1.5 percent in 2015 - but of course that all depends on what happens in Greece. No matter how deep German pockets are - they could take quite a hit in the event of a euro zone break-up.

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Consumers fuel Germany's recovery

Tuesday, February 24, 2015 - 02:04