The German economy grew by 0.6 percent last year. That is significantly less than in 2018 and 2017 with economic growth of 1.5 and 2.5 percent, as the Federal Statistical Office announced. Nevertheless, Europe's largest economy has grown for the tenth year in a row, which is the longest growth phase in unified Germany.
In 2019, however, growth lost momentum, it was said. According to an initial estimate by the Federal Office, gross domestic product increased "slightly" compared to the previous quarter at the end of the year.
Above all, consumption contributed to the overall positive result. Private consumption expenditure was 1.6 percent higher than in the previous year, and that of the state, which includes social benefits and salaries, rose by 2.5 percent.
Investments in plants also increased sharply, as the statisticians said: 3.8 percent more was invested in buildings than a year earlier. The export-oriented German industry in particular has had a tough year. The trade disputes and the drama surrounding Brexit unsettled customers and slowed investments. Key German sectors such as auto and mechanical engineering, as well as the electrical and chemical industries, were clearly affected by this. As a result, the industry slipped into a tangible recession over the course of the year.
This is one of the reasons why foreign trade was a growth driver. According to the preliminary calculations, imports increased by 1.9 percent more than exports of goods and services by only 0.9 percent.
State again generates surplus
Despite the weakening economy, the German state achieved a surplus for the eighth consecutive year. The Federal Statistical Office announced that the federal government, the states, the municipalities and social insurance collectively raised 49.8 billion euros more than they spent. In 2018, there was a record surplus of over 62 billion euros. The sum corresponds to a surplus of 1.5 percent of gross domestic product after 1.9 percent in 2018.
"The labor market does not yet reflect the deterioration in the economy," said economist Jens Boysen-Hogrefe from the Institute for the World Economy (IfW) about the high surplus again. "Employment and wages have continued to increase. This has resulted in more tax and premium income." Private consumption and the construction boom also flushed more money into the state's coffers. "The low interest rate phase also relieves public budgets," said the tax assessor. "In addition, a lot of the money that was actually planned for investments does not flow away."
The federal government alone ended the year with a plus of 19.2 billion euros. The federal states generated a surplus of 13.3 billion euros, social security of 10.7 billion and municipalities of 6.6 billion.
"The scope for politics will decrease in the future," said Boysen-Hogrefe. "The soli will be partially abolished in 2021. Any investments available will be called up at some point." Demographic change will strike in the medium to long term. More pensioners are likely to face fewer contributors. The financial situation of health and nursing care insurance is also affected by demography.