German domestic demand poised to continue supporting the recovery

The German statistical office confirmed Q3 GDP growth at 0.3% q/q, in line with expectations of a continuing moderate recovery and slightly down from 0.4% q/q in Q2 15. The slump was mainly due to a negative contribution from net trade (-0.4pp after +0.8pp in Q2). Final consumption expenditure remained the main growth driver (0.6pp).

A strong November Ifo report implies that domestic demand should continue to be Germany's main growth engine. The services sector expectations reached a new all-time high. The ongoing recovery in manufacturing expectations also point to positive developments in investment going forward, which fell for a second consecutive quarter in Q3.