German economy 'unfazed' by Trump election

The Ifo's headline business confidence index reached 110.4 points in November, unchanged from the October reading, and the highest level since April 2014.

German economy 'unfazed' by Trump election

World Bulletin / News Desk

The German economy has shrugged off the shock election of Donald Trump as US president, with business confidence holding at a two-year high and growth seen picking up in the final quarter.

"The economic upturn in Germany remains intact. The German economy seems to be unfazed by the election of Donald Trump as US President," said the Munich-based Ifo economic institute in a statement on Thursday.

The survey suggests that the "German economy is in good shape," said analysts at Capital Economics.

The construction sector showed the greatest optimism about the business climate, with a sub index reaching a new record high.

Wholesaling was also positive, but the manufacturing sector signalled less optimism about the coming six months, "mainly due to less dynamic export prospects".

Trump's taking of the White House has sent shockwaves through the global economy, with export-dependent economies particularly jittery as the populist has pledged to reverse free trade treaties.

This week, he promised to drop the Trans-Pacific Partnership -- a vast agreement between 12 countries including Japan, Australia and Peru.

Although Trump has not spoken specifically about a planned free trade deal between the EU and the US, German Chancellor Angela Merkel admitted last week that the accord would now not be completed.

Although the German economy was once heavily weighted towards exports, domestic consumption has in recent months become a main driver of growth.

With unemployment sinking to a record low and wages steadily rising, consumption power has been rising in Europe's biggest economy.

The arrival of almost 900,000 asylum seekers last year alone has also prompted the government to invest heavily in infrastructure for the newcomers.

On Thursday, federal statistics office Destatis confirmed that growth reached 0.2 percent in the third quarter, held up mainly by domestic consumption.

Domestic spending rose 0.4 percent and state expenditure by one percent compared to the preceding quarter, but gross investment and imports experienced negligible growth and exports fell by 0.4 percent.

"Foreign trade had a negative effect on gross domestic product (GDP) growth" on the order of 0.3 percentage points, Destatis said of the period that covers the immediate aftermath of the Brexit referendum in Britain, a major market for German goods.

Analysts have however predicted a pick-up in activity for the final quarter before easing off again in 2017.

In 2015, Germany notched up economic growth of 1.7 percent.

The government predicts growth of 1.8 percent in 2016, which will fall to 1.4 percent in 2017.

Last Mod: 24 Kasım 2016, 13:47
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