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Germany’s Domestic Market Blooming Due to Increased Consumer Spending

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Published on : Feb 24, 2015

The languishing European economy is getting boost from an unlikely market segment: demands from Germany’s domestic market.

A breakdown of fourth quarter domestic product of Germany in the year 2014, released on Tuesday by the national statistics office, reveal a strong surge in investments and a continued growth in consumer spending for the year’s second consecutive quarter.

The surge in Germany’s domestic demand shows that the country’s economy, which has always been disparaged by international bodies for its anemic domestic growth and an excessive dependence on exports and, is rebalancing itself. This surge has been essentially brought about by the influence of cheap-money policy introduced by the European Central Bank and other domestic influences, including decreasing gas prices and rising wages.

Experts are optimistic that the German population will continue its spending surge in the coming years as well.

Christian Schulz, an economist at the Berenberg bank states that there are a lot of reasons why the households are spending more, an important reason of which is the factor of rising wages of the Germans population as the country’s job market is currently blooming.

The country’s population invested positively in vehicles and machinery and allowed it to rise by 0.4% in the last quarter of the year 2014, after having undergone a decline of 1.4% in the year’s third quarter. Investments in the building sector increased by 2.1% in the year’s last quarter, which can be largely attributed to the growth observed by the market in both residential and public construction. Housing construction demand has increased in Germany and housing prices have spiked up in certain areas since 2010 owing to high liquidity and low interest rates.

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