German trade boosts economic growth as political risks rise

Exports and investment propelled German growth in the third quarter, putting Europe’s biggest economy in a strong position to weather rising political uncertainty after coalition talks collapsed.

Trade added 0.4 percentage point to economic expansion in the July-September period, with company spending on equipment contributing 0.1 percentage point, the Federal Statistics Office in Wiesbaden said on Thursday.

Growth domestic product increased 0.8% - in line with a November 14 estimate - putting the economy firmly on course for its best annual performance in six years.

Economists surveyed by Bloomberg have lifted their forecast for 2017 German growth eight times since the start of the year to currently 2.2%, and the Bundesbank predicts that full order books and business confidence at a record high will continue to underpin momentum. Yet, the failure of Chancellor Angela Merkel to form a governing coalition has cast a shadow over the outlook.

After a month of negotiations, the Free Democrats walked out exploratory talks on Sunday, leaving the country in political limbo and raising the prospect of new elections.

German President Frank-Walter Steinmeier has urged all political groups to put responsibility to the nation ahead of party interests.

Government consumption was unchanged in the third quarter from the previous three months, while private spending declined 0.1%, according to the report. Company investment in equipment rose 1.5%.

Exports were up 1.7%, compared with a 0.9% increase in imports.

A breakdown of GDP components for the euro area will be published on December 5. The 19-nation economy expanded 0.6% in the third quarter and is headed for its best annual performance in a decade.