German Q3 GDP Growth Smashes Expectations

Tyler Durden's picture

German GDP growth for Q3 2017 printed at 0.8% Q/Q, easily beating the consensus estimate of 0.6%, which was in line with growth in the previous quarter, driven by fixed capital formation amid stable household and government consumption. While year-on-year GDP growth was reported as 2.3%, the underlying growth was 2.8% after adjusting for calendar effects. The data confirmed that German growth was on track for its best year since 2011, and pushed the EUR higher for the fifth day, rising above 1.1700 for the first time in 3 weeks.

More from Bloomberg:

The German economy powered ahead in the third quarter, underpinning a recovery in the euro area.... Output increased 2.8 percent from a year earlier when adjusted for working days. The report confirms the Bundesbank’s prediction that the German economy carried its strong growth momentum into the second half, putting it on course for its best performance since 2011 and potentially straining up against its maximum capacity…“


You can feel the German economy is really humming along,” Holger Sandte, chief European analyst at Nordea Markets in Copenhagen, said before the release. “We are looking at a pretty robust picture so that raises the question: where is the speed limit?”

Germany’s Federal statistics office noted that the stronger-than-expected growth was driven by exports and capital investment. Spending on equipment was reported to be particularly strong. With hindsight, this shouldn’t be that much of a surprise as both “hard” and “soft” indicators – especially in the manufacturing sector - have shown accelerating momentum in 2017. The September manufacturing PMI reading for September 2017 of 60.6 was a 77-month high and printed at the same level in October 2017, implying that the momentum has carried forward into the last quarter of the year. However, if there was one small negative in today's German data, it was the ZEW Indicator of Economic Sentiment: for November 2017, the expectations indicator rose 1.1 points from 17.6 the previous month to 18.7, below the 19.5 consensus.

On an encouraging note for the Eurozone, while Germany remains the foundation of growth, it is more broadly spread than it’s ever been. Indeed, the better-than-expected growth across Europe was the basis for the IMF’s upgrade to its 2017 GDP forecast of 3.6%, the fastest growth since 2010. From Bloomberg:

While Germany has long been an engine of expansion for the euro area thanks to robust domestic demand and striving exports, the rest of the region is finally catching up. Differences in growth rates between member states have shrunk to the smallest in the region’s history and the European Commission said last week that the 19-nation region will grow this year at its fastest pace in a decade. The International Monetary Fund said on Monday that strengthening growth across the European region - which includes the euro area as well as developing economies in the central and eastern part of the continent - is spilling over into the rest of the world. The brighter prospects accounted for the bulk of the upward revision to its global outlook in October.

The GDP news will be gratefully received by Chancellor Angela Merkel as she continues the tricky coalition negotiations with the pro-business Free Democrats and the Green Party which, as Reuters notes, is “an alliance untested at the national level”. Back to Bloomberg:

Chancellor Angela Merkel entered the final stretch of preliminary talks to form a new government, with factions in the complex multi-party negotiations remaining far apart. Any decisions taken by the future coalition partners on whether to cut taxes or funnel more money into education and digital infrastructure will impact Germany’s growth prospects. The rate of economic expansion over the next two years looks set to exceed the pace that’s sustainable in the long term.

While the Eurozone’s structural problems remain unaddressed and the ECB’s ability to wind back its stimulus remains untested, the worst part of Germany's economic strength and the broader Eurozone resurgence, is that a host ECB bureaucrats will be putting themselves forward to take the credit. Uh-oh, too late…

The European Central Bank is taking credit for putting the economy back on its feet after a sovereign-debt crisis produced record unemployment and near-deflation, and threatened the survival of the currency union. Vice President Vitor Constancio said on Monday policy makers have been “highly successful” in driving the recovery by cutting interest rates below zero and buying more than 2 trillion euros ($2.3 billion) in assets, mostly government bonds. His Executive Board colleague Benoit Coeure argued that the region’s upswing is probably the strongest in almost two decades in terms of “robustness and balance,” creating scope for structural reforms that would come as policy makers scale back monetary stimulus.

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Max Damage's picture

SO when do they instruct the ECB to fuck over the rest of the EU and raise rates faster?

Clint Liquor's picture

The ECB is still doing monthly QE. If you want to know how the patient is doing, you have to take them off life support.

Doom and Dust's picture

40bn/month on a 14tn GDP - drop in the bucket.

That is not life support, just a painkilling prescription (no opiods)

Clint Liquor's picture

Keeping negative interest rates by buying up gov debt via QE is not Tylenol. The patient is deathly ill, and they know it.

Fisherman Blue's picture

Can't take them off, they are already dead.

BarkingCat's picture

Are they counting the money they spent on the refugees?


They need to let more in, it will really goose (step) their GDP.

nmewn's picture

If they let anymore in, I really begin to fear for the health & safety of the ponies in the childrens petting zoos...

...apparently to lovelorn Mawhamidins they look like goats.



GotAFriendInBen's picture

.8 is a smash?

Will Trump be taking credit?

desirdavenir's picture

it bears to repeat, but in EU the numbers are QoQ, not YoY. Also, 2.5% YoY for Eurozone, with population growth at 0.4%, means 2.1% growth on GDP per capita (the one that matters to peoples). Compare with US, 0.7% population growth, 1.6% GDP growth, so only 0.9% growth per capita (and I am forgetting about those funny inflation numbers...)

Bt most important, for Germany, and I hope also for the rest of Europe, growth is driven by investment, not by credit card nor housing. Which is qualitatively a much better kind of growth in the long term.

Singelguy's picture

No, 0.8 is "powering ahead". Islam will take credit.

EddieLomax's picture

Brexit is coming.

And those refugee's will soon be weighing on the bottom line

Kaeako's picture

The refugees are contributing to the German economy nicely. Lots of new people recycling money in the economy, lots of new jobs to take care of refugee related issues, can't forget all the real estate related flows to house the refugees. Some of them probably already managed to set up kebab restaurants, pizzerias and cleaning services. Mama Merkel is the great savior, of people and of economies.

DelusionsCrowded's picture

Yes , that really true . According to German Economists , if a 'refugee' robs and kills a skilled German worker , then you create at least 5 jobs . One for the gravedigger (shovels only ) , one for the African to replace the skilled Caucasion killed and the stolen money adds to financial velocity . Its economic science and anyone who disagrees can work in the Gulag for free :-)  , or just take drugs OD yeah cool . 

I love living in 'Democratic' germany , I have the right to hate myself (not illegal yet) and thankyou brother  I have the right to kill myself . Death will set you free , the new slogan . 

Fireman's picture

Are you deluded or being sarcastic?

UnschooledAustrianEconomist's picture

The foreseeable effects of helicopter money (given to the "refugees").

Unfortunately those "refugees" will never contribute to the real economy in an amount that would support that extra money created.

Comparable to giving home and auto loans to people without sufficient income to pay the interest or even pay back the loan.

Bubblenomics, what could possibly go wrong...

DelusionsCrowded's picture

Africans and Muslims are the 'future' of Germany . Don't you listern to Germanies Masonic Gov .

According to Masonic Theory South Africa will soon look like any wealthy European state . Really its true , they are going to build a techocratic miricle and  with IQ 80's :  Rockets to Mars and all the fireworks !! Wow just great , just really great , I feel so good feeling this 'truth' . 

neutrino3's picture

Declarations, declarations, declarations ...

Put in some ratio, I myself declare, that I gained overall growth of 4 kilos. Fucking sweets.

Anybody else? Use it freely. Anything is legitimate so far.

ejmoosa's picture

8% would have smashed my expectations.

0.8%?  That could be a rounding error.


Rick Cerone's picture

There is no difference between East Germans and African trash.

Germany is doomed.