Upswing

• German economic growth gathered pace in Q4
• Surveys are picking up despite continued uncertainties

After experiencing a soft patch in the middle of last year (-0.1% in Q2 and +0.1% Q3), the German recovery accelerated markedly in Q4 (+0.7% q/q), mainly backed by internal demand. As a matter of fact, a set of favourable factors backs consumer confidence household real disposable income and their spending. First the job market is nearing full employment and wages are rising at a dynamic pace. Second the introduction of a minimum wage should benefit nearly 4 million Germans, with a positive impact on disposable income. Third households should benefit from the decline in oil prices since last summer, which results not only in lower pump prices, but also in lower heating bills. The National Office of statistics also indicated that corporate fixed capital investment picked up in Q4 and especially in the construction sector. Indeed the business climate has improved recently thanks to the falling euro against the dollar, lower crude oil prices, and very accommodating monetary and financing conditions. In addition, the construction sector probably benefited from favourable weather conditions. Confidence surveys continued to improve indicating that the recovery might gain some momentum over the next months, despite continued several uncertainties.