Germany expects solid growth at the start of 2017, driven by manufacturing and booming construction, but uncertainties over Brexit and US President Donald Trump’s trade policies clouded the outlook for its export-orientated economy.
The Economy Ministry’s monthly report came as a survey showed the mood among German investors deteriorated more than expected in February, due in part to concerns about the outcome of talks on Britain’s departure from the EU.
In addition, Trump’s declarations in favor of protectionism have alarmed politicians and managers in Europe’s biggest economy, which derives nearly half its economic output from exports.
Trump’s top trade adviser has also accused Germany of using a “grossly undervalued” euro to gain advantage over the US and its own EU partners. 
German Chancellor Angela Merkel has rejected the suggestion, noting the European Central Bank (ECB) is in charge of the euro, not Germany.
The German economy grew by 0.4 percent in the final quarter of 2016, data showed on Tuesday, as increased state spending on refugees, higher private consumption and construction in Europe’s biggest economy more than offset a drag from trade.
The growth figure for the final three months of 2016 came in slightly weaker than the consensus forecast in a Reuters poll of 0.5 percent. Still, it marked a sharp rebound after the German economy barely expanded over the summer.
The overall growth rate for 2016 was confirmed at 1.9 percent, the strongest rate in half a decade.
“The fourth quarter was not as strong as most economists had expected, but sentiment surveys rose sharply in the past months and orders are also pointing upward,” Commerzbank analyst Joerg Kraemer said.
“Therefore growth could slightly pick up in the first quarter of 2017,” Kraemer said, adding that private consumption would continue to support overall growth.
The Economy Ministry said in its monthly report that rising orders in manufacturing and construction signaled further economic expansion in the first quarter of 2017.
A gauge measuring investors’ assessment of the economy’s current conditions edged down to 76.4 points from 77.3 in January. This was also weaker than the Reuters consensus forecast, which predicted a nearly stable reading of 77.2.
ZEW President Achim Wambach said the drop in expectations was probably the result of recent weaker-than-expected figures from industrial production, retail sales and exports.
“Political uncertainty regarding Brexit, the future US economic policy as well as the considerable number of upcoming elections in Europe further depresses expectations,” he said.
“Nevertheless, the economic environment in Germany has not significantly worsened,” Wambach added.

Source: Arab News