2018.02.1404:52:00UTC+00German Economy Expands In Q4

The German economy grew as expected at the end of 2017, largely driven by foreign demand, while inflation continued to ease in January, data from Destatis revealed Wednesday.

Gross domestic product grew 0.6 percent sequentially in the fourth quarter, in line with expectations, but slightly slower than the revised 0.7 percent expansion seen in the third quarter.

At the same time, the calendar-adjusted GDP advanced at a faster pace of 2.9 percent annually, after rising 2.7 percent. GDP was forecast to grow 3 percent.

Similarly, price-adjusted GDP grew 2.3 percent versus 2.2 percent a quarter ago.

Positive contribution to sequential growth came mainly from foreign demand. Government spending increased, whereas household consumption expenditure remained roughly at the previous quarter's level.

Gross fixed capital formation in machinery and equipment was slightly up on the previous quarter, while capital formation in construction was slightly down, Destatis said.

Destatis reported 2.2 percent growth for the whole year of 2017. The provisional annual GDP result released in January has been confirmed.

Commerzbank analyst J?rg Kr?mer said the upswing in the German economy could continue for another two or three years despite the roll-back of labor market reforms because cyclical tensions on the labor market are not yet in sight.

Eurostat is set to release GDP data for the euro area at 5.00 am ET. According to previous estimate, the currency bloc expanded 0.6 percent in the fourth quarter.

Destatis also confirmed that EU harmonized inflation in Germany slowed to 1.4 percent in January from 1.6 percent in December.

With inflation and wage growth still subdued in the euro-zone's largest and arguably strongest economy, the European Central Bank interest rate hikes still seem like a pretty distant prospect, Jennifer McKeown, an economist at Capital Economics, said.