The German economy remained on its growth path in the third quarter of 2015. According to a report by the Federal Statistical Office from 13 November 2015, real GDP went up by a seasonally and calendar-adjusted 0.3% between July and September 2015 compared with the previous quarter. The pace of growth was therefore somewhat more moderate than in the second quarter, when GDP rose by as much as 0.4%.

In its November issue of the Monthly Report, the Bundesbank concludes that domestic consumption was the main driver of economic growth in the third quarter, whereas investments and exports failed to provide any stimulus.

Growth driven by domestic demand

The Bundesbank's economists identified private consumption as being the main driver behind domestic demand in the third quarter. In their estimation, households' real income increased as a result of the considerable acceleration in employment growth. Moreover, the economists report that, as in the fourth quarter of 2014 and the first quarter of 2015, purchasing power gains brought about by the decline in energy prices were one of the factors behind the stronger growth in private consumption.

According to the Monthly Report, consumer demand was additionally boosted by the mounting influx of refugees, which led to a rise in transfer payments as well as in expenditure for staff, accommodation and non-cash benefits at the central, state and local government levels. The Bundesbank economists also identified a continued expansion in housing construction investment, whereas enterprises remained cautious with regard to investment in new machinery and equipment and in new buildings.

Exports lacking momentum

Export business did not grow any further following the strong upswing in the second quarter of this year, the Monthly Report states. Exports of goods were down slightly by ¼% on the quarter after adjustment for seasonal and price variations.

According to the figures available up until August, the majority of trading partners in advanced and emerging market economies are now reporting a slowdown following the regionally broadly based upturn that they had been experiencing since the second half of 2014. Exports to the USA receded considerably, after having previously recorded strong growth. Exports to China continued to contract, as has been the case since the beginning of the year, the economists write. In July and August, German exports to the People's Republic of China were 7¼% lower than in the previous year. The only exceptions to the weak export performance were sales to central and east European countries, which once again recorded a perceptible quarter-on-quarter increase. More goods were also exported to Japan and the OPEC countries.

Other topics covered by the November issue of the Monthly Report include current monetary policy developments and the situation on the financial markets. This issue also takes a look at public finances in Germany.