By Michael Nienaber
BERLIN (Reuters) - Strong exports and solid construction activity helped the German economy to grow by a stronger-than-expected 0.3% in the final quarter of last year, the Federal Statistics Office said on Wednesday, revising up an earlier estimate.
The office, which previously had reported a 0.1% expansion over the previous quarter, also revised upward its 2020 full-year GDP figure for Europe's largest economy to -4.9% from -5.0%.
Adjusted for calendar effects, the economy shrank by 5.3% last year, a much smaller contraction than in many other European countries, helped by a strong fiscal response to the damage caused by the COVID-19 pandemic.
A debt-financed fiscal splurge created an overall state budget deficit of 139.6 billion euros or 4.2% of gross domestic product in 2020, the office said. This was the first deficit since 2011 and the second-highest since German reunification.
The fourth quarter expansion followed a record quarterly growth rate of 8.5% in the third and an unprecedented plunge of 9.7% in the second, due to the effects of Germany's first lockdown to slow the coronavirus pandemic.
The second lockdown, imposed at the beginning of November on bars, restaurants and entertainment venues and expanded in mid-December to include most shops and services, caused a plunge in household spending in the fourth quarter, the office said.
Disposable income rose slightly, however, thanks to job protection schemes and state aid for parents. As the lockdown prevented many consumers from spending, the savings rate posted an unusually high reading of 15.7%.
Exports grew by 4.5% on the quarter while household spending fell by 3.3%. This meant net trade contributed 0.6 percentage points to the overall growth rate, whereas sluggish domestic activity subtracted 0.3 percentage points, the office said.
Investments in construction rose 1.8% on the quarter, the office said.
Thomas Gitzel from VP Bank said low interest rates had helped the construction industry to continue to prosper while the export-oriented manufacturing sector had benefited from growing orders from Chinese customers.
The outlook remains clouded because German authorities have extended the stricter lockdown until at least March 7.
"Going forward, we stick to our forecast of a 1.5% q/q decline in the first quarter of 2021, mainly due to the negative effects on overall economic activity from the extended and tightened lockdown," UniCredit said in a research note.
Carsten Brzeski from ING said that stricter lockdown measures since mid-December, harsh winter weather in February, a reversal of pre-Brexit hoarding in the UK and weaker foreign demand, at least from other euro zone countries, had increased the downside risk for the first quarter of 2021.
"The growth drivers of the fourth quarter could easily become drags in the first," Brzeski cautioned.
(Reporting by Michael Nienaber; Editing by Maria Sheahan and Kevin Liffey)