German economic growth slows slightly in Q4 2017, but remains strong

German economic growth slowed a bit on a sequential basis in the fourth quarter. The economy expanded 0.6 percent in the fourth quarter, as compared with third quarter’s 0.8 percent growth. The Federal Statistical Office stated that the impetus came mostly from exports and slightly from investment in machinery and equipment, noted Commerzbank. On a year-on-year basis, the economic growth stayed at 2.3 percent.

The third quarter growth was downwardly revised to 0.7 percent from 0.8 percent. But this lowered the statistical basis for the 2018 forecast not even by a full tenth of a percentage point.

“We can therefore easily confirm our 2.5 percent growth forecast for 2018. This is also supported by the strong growth in Q4 manufacturing orders (4.1 percent vs. Q3) and the highest level of the Ifo business climate since 1969”, stated Commerzbank.

Several investors are wondering how long the upswing in Germany can carry on. However, in the past upswings usually ended when cyclical exaggerations and tensions occurred. Following the wage deal in the German metal industry, collective wages in the economy as a whole will increase by just fewer than 3 percent in 2018 and a good 3 percent in 2019.

Thus, there is no sign of wage inflation rising sharply, even though the jobless rate has fallen sharply in recent years. It appears that globalization is keeping wage rises curtailed, said Commerzbank. This is even more so in the euro area, which is why the ECB’s monetary policy for Germany would be far too loose for a long time.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Euro was slightly bullish at 60.5606, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -184.301. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest