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Property bug, spending boost German GDP

Tuesday, May 24, 2016 - 01:32

Strong private consumption and higher construction investment drove a 0.7 percent rise in German gross domestic product in the first quarter, more than offsetting the effects of weaker foreign trade. As David Pollard reports, private consumption and construction investment is propelling growth.

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It's traditionally a British disease, but could Germany now be getting the property bug? Q1 GDP showed the biggest quarterly rise in two years for Europe's largest economy. Construction spending one of its main drivers. (SOUNDBITE) (English) FXPRO, HEAD OF RESEARCH, SIMON SMITH, SAYING: "Germany property, very stagnant, very staid market compared to, say, the UK ... But you go to cities like Munich, and you see growth, you see buildings, so they're taking advantage of these very low interest rates, which are more for other countries rather than Germany." And German consumers also taking advantage of low interest rates to spend a bit more. Private consumption - as construction - contributing 0.2 percentage points to output. Both getting a boost from the ten billion euros the government is spending on refugees, this year alone. Those altogether helping make up for slower exports. So why then are investors apparently fretting - the latest ZEW sentiment index down this month ..? (SOUNDBITE) (German) HEAD OF CAPITAL MARKETS ANALYSIS AT BAADER BANK, ROBERT HALVER, SAYING: "Europe is in a state of disintegration, we are concerned that Britain is leaving us at the end of June, we don't know yet for sure, but it surely is an issue." As could be anyway a euro zone where peripheral states are struggling to catch up with Germany. (SOUNDBITE) (English) FXPRO, HEAD OF RESEARCH, SIMON SMITH, SAYING: "The euro zone can't just rely on German growth to see it through and have others sort of hobble behind. We need to see such growth coming from across the euro zone in a competitive fashion." A big data week for Germany not over yet - its closely-watched IFO Index due for release on Wednesday.

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Property bug, spending boost German GDP

Tuesday, May 24, 2016 - 01:32