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German economy shifting into high gear

Germany's economy expanded in the final three months of 2016, and the pickup was more pronounced than in the previous quarter, the statistics office reported. State spending related to migrants played no small role.

The German economy grew at a faster pace of 0.4 percent in the final quarter of 2016, the national statistics office, Destatis, reported on Tuesday.

The figure marked a decent pickup from the 0.1-percent expansion rate logged for the previous quarter.

Destatis also confirmed its previous estimate of full-year growth, saying that Europe's largest economy grew by 1.9 percent throughout 2016.

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German Chamber of Commerce and Industry raises growth outlook

Strong domestic demand

Officials at the Wiesbaden-based statistics agency said domestic consumption was a major driver behind fourth-quarter growth.

It said many people had been willing to make more purchases, including big-ticket items, as continuously low interest rates made it next to impossible to secure decent yields from savings.

Destatis also mentioned increased state spending, not least on accommodation for hundreds of thousands of refugees, and higher spending on infrastructure projects.

In 2015, Germany took in 890,000 asylum seekers. Last year, the figure dropped to 280,000, according to the Interior Ministry. The influx has resulted in a boost in the construction sector as new homes have to be built quickly to accommodate the newcomers.

Most economists are confident that the economic expansion will carry through into 2017. Commerzbank Chief Economist Jörg Krämer said he expected a strong performance in the first quarter of the year amid healthy demand for German goods abroad.

So far, it has remained unclear to what extent the new administration in the US may spell trouble for the German economy and German exporters in particular.

US President Donald Trump's protectionist agenda has unnerved traditional allies in the European Union, including Germany, with many EU member countries fearing hefty import tariffs. In November 2016, the most recent month with country-by-country statistics, sales to the US accounted for just over 12 percent of German exports.

hg/jd (dpa, AFP)

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