Berlin urged to spend more as economy surges ahead

Germany on Tuesday said its economy grew at a faster pace than expected in the third quarter, fuelling calls for the incoming government to loosen the purse strings and invest more to keep Europe's powerhouse humming.

Gross domestic product (GDP) rose by 0.8 percent between July and September compared with the previous quarter, powered by foreign demand and increased investment, the federal statistics office Destatis said.

"German economic growth continues at a high rate," it said.

The preliminary figure, adjusted for seasonal swings, beat expectations as analysts surveyed by Factset had forecast 0.6 percent growth.

"Exports were stronger than imports in the third quarter. As a result, net exports had a positive impact on the GDP compared to the previous quarter," according to Destatis.

Robust government and consumer spending "remained rather stable" in the third quarter, it added, while noting that investments had increased, particularly "in machinery and equipment".

Destatis also revised upwards its first-quarter figure, saying the German economy accelerated by 0.9 percent in the first three months of 2017 instead of the earlier reported 0.7 percent.

Second-quarter growth was confirmed at 0.6 percent.

"Germany's economic success story goes on and on and on," said economist Carsten Brzeski of ING Diba bank.

He said he saw little reason to expect a sudden end to the country's "golden cycle", given the low interest rate environment, the strong labour market and the expectation that the next government would boost spending.

Chancellor Angela Merkel and her conservative allies are locked in talks with the liberal Free Democrats and the left-leaning Greens to forge an untested three-way coalition after September's inconclusive election.

They have already agreed to maintain the government's cherished balanced budget, but among the thorny issues still being debated are demands to dismantle or lower some taxes and boost spending on education and infrastructure.

"With more parties than before likely to be part of the government, and in a position to deliver on some of their campaign proposals, government expenditure will likely rise substantially," Berenberg economists said in a client note.

(AFP)