By Ralph Atkins in Wiesbaden Published: January 12 2011 09:55 | Last updated: January 12 2011 09:55
Germany last year saw one of its fastest growth spurts since the country’s reunification in 1990, powered by a rebound in investment, exports and a pick-up in consumer spending. Gross domestic product expanded by 3.6 per cent in 2010 compared with the previous year, according to the federal statistics office in Wiesbaden. That partly reversed a 4.7 per cent contraction in 2009, when Germany was hit by its worst recession since the second world war – although economic activity remained below pre-crisis levels. The headline growth rate was the highest since the pan-German data started in 1991. Adjusted for difference in the number of working days, however, the year-on-year growth rate was 3.5 per cent – slightly lower than the 3.6 per cent seen in 2006. Germany had “recovered from the economic crisis astonishingly well and rapidly,” said Roderich Egeler, the statistic office’s president. The rebound was “one of the most mind-boggling turnrounds in German economic history”, said Andreas Rees, economist at UniCredit in Munich. The strong recovery in Europe’s largest economy has countered some of the pessimism about the continent-wide outlook – encouraging hopes that knock-on effects will boost growth prospects in countries worst-hit by the eurozone debt crisis. Among other European countries, only Sweden and Slovakia are expected to report faster growth last year. However Mr Egeler admitted much of Germany’s rebound reflected “catch-up” effects after 2009’s downturn and had occurred largely during the spring and summer months of last year. GDP growth figures for the final quarter of 2010 will not be released until February, but officials said they thought the economy had expanded by about 0.5 per cent, on a seasonally-adjusted basis, compared with the previous three months. The exceptionally severe winter weather would have had a negative impact at the end of the year, they warned. Last year’s 3.6 per cent growth rate was below some economists’ expectations – but much higher than most had expected at the start of 2010. Germany benefited from a pick-up in global trade, particularly the demand for its engineering products from fast-growing countries such as China. But details of the GDP figures showed the biggest contribution to growth came from a rebound in investment. Spending on equipment rose by 9.4 per cent – after a contraction of 22.6 per cent in 2009 – as companies press ahead with capital spending plans shelved after the collapse of Lehman Brothers in late 2008. Eurozone policymakers have been encouraged by signs of a pick-up in German domestic demand – not just in investment but also in high street spending – which would benefit other countries exporting into the country. Consumer spending rose by 0.5 per cent last year – a respectable pace by German standards – and further growth is expected by economists in 2011. Boosting consumer confidence have been steady falls in unemployment. The number of Germans with jobs rose to a record 40.5m last year, according to the statistical office. In spite of the pick-up in growth, Germany’s public sector deficit rose to 3.5 per cent of GDP last year, breaching the 3 per cent limit set for eurozone members for the first time in five years.