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Forex News: Germany Sees a Surprising Surplus in Public Spending

Benjamin Spier

THE TAKEAWAY: German economic growth slows to 0.7% in 2012, less than expected -> Public spending sees a surplus -> Euro trading slightly higher

German economic growth slowed to 0.7% in 2012 from 3.0% in 2011. The rise in GDP was slightly lower than an expected 0.8% annual growth. However, public spending saw a surplus in 2012 for the first time in five years. The surplus between public revenue and spending was 0.1% of the GDP, beating expectations for a 0.1% public deficit.

Exports were the main driver for the German economy in 2012, according to the Federal Statistical Office. The trade surplus provided 1.1 percentage points of GDP growth, as exports were up 4.1% from a year earlier. Consumer spending increased 0.8% and government spending increased 1.0% in 2012. Earlier today, German inflation was reported at an average of 2.0% in 2012.

The Federal Statistical Office also reported that the German economy probably shrank 0.5% in Q4. Despite the drop off in growth, the office was still proud of the annual economic expansion. “In 2012 the German economy proved to be resistant in a difficult economic environment and withstood the European recession”, said Roderich Egeler, President of the Federal Statistical Office.

The German economy has been affected by the Euro debt crisis plaguing the region. The European Central Bank has previously forecasted a gradual recovery for the Euro-zone economy well into 2013. Signs of a recovery in the region or in the Euro-zone’s biggest economy would be Euro positive.

The news of the annual growth was followed by a rise in Euro to 1.3370 against the US Dollar. It’s unclear if the rise was a reaction to the unexpected public surplus or if it was a natural retracement of some of the losses over the past few hours. EURUSD rose above 1.3400 for the first time in ten months yesterday, and could continue to see resistance by the key figure. Support could be provided by a broken resistance around 1.3284.

EURUSD Daily: January 15, 2013

Germany_Sees_a_Surprising_Surplus_in_Public_Spending__body_eurusd_daily_chart.png, Forex News: Germany Sees a Surprising Surplus in Public Spending

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