The German consumer price index rose by 1.5 percent in May compared with the same month last year, slower than the 2.0 percent recorded in April, the federal statistics office Destatis calculated in preliminary data
Berlin (AFP) - Germany booked solid growth in 2016, data showed Thursday, with a sizeable surplus in the public finances of Europe's economic powerhouse likely to fuel fierce political debate in an election year.
Growth of 1.9 percent was largely powered by household consumption and state spending on refugees, the federal statistics office Destatis said in a preliminary estimate.
The better-than-expected figure beats the 1.7 percent seen in 2015 and marks the fastest pace of growth recorded in Germany since 2011.
"Domestic consumption was decisive for the positive development in the German economy in 2016," Destatis said in a statement, pointing to increases of 2.0 percent and 4.2 percent respectively in household and government spending.
"One of the reasons for this strong growth is that a large number of people seeking refuge immigrated, which resulted in considerable costs," Destatis said.
Germany has registered more than one million asylum seekers since 2015 and the government has set aside a multi-billion euro fund to finance the costs of housing and integrating the newcomers.
Exports, traditionally the motor of the German economy, were less critical in 2016, expanding 2.5 percent as imports increased 3.4 percent.
"The German economy remains an island of happiness," said economist Carsten Brzeski of ING Diba bank.
Destatis also reported that Germany notched up a comfortable surplus on its public budget equivalent to 0.6 percent of gross domestic product in 2016, the third consecutive year the country's public finances have been firmly in the black.
Separately, the finance ministry said the government achieved a federal budget surplus of 6.2 billion euros last year -- a closely-watched figure ahead of an election expected in September.
- 'Give back' -
Politicians are already battling over how to spend the surplus, with conservatives advocating tax reductions and paying off old debts, while left-wingers call for investment in infrastructure and education.
"We should give something back to the citizens," Bavaria's conservative finance minister Markus Soeder told Bild newspaper. "Given the low interest rates and rising inflation, now is the time for tax cuts."
Germany's strong performance is also likely to fuel calls from European peers for Berlin to use its fiscal leeway to ramp up spending and help bolster the eurozone recovery.
Brzeski noted that German growth had picked up last year unperturbed by Brexit, a coup attempt in Turkey, Donald Trump's shock US election win and the fall of Italian Prime Minister Matteo Renzi.
"Strong domestic demand has shielded the German economy against most external risks," he said.
Overall growth overshot the 1.8-percent forecast of the Bundesbank, Germany's central bank -- which had already upped its forecast for the year in December.
In absolute terms, Germany's gross domestic product increased to more than 3.1 trillion euros -- consolidating its position above the 3.0 trillion threshold breached for the first time in 2015.
Looking at the fourth quarter alone, Destatis said that according to a rough calculation the German economy expanded by around 0.5 percent in the final months of 2016, continuing its recovery from a summer slump.
The official fourth-quarter estimate will be published on February 14.
Strong business and investor confidence surveys and positive industrial indicators have some observers predicting the good times will carry on into the new year.
"For 2017, we are expecting a continued upswing," said analyst Stefan Kipar of BayernLB bank.
But Brzeski warned against "self-complacency" among policymakers.
"The economy urgently needs new impetus from new structural reforms and stronger public and private investment," he said.
"It is very unlikely that it will get any of these before the elections."