Quarterly Real Value of GDP and Terms of Trade: Oil Price Increase Dampens Expansion

In addition to the real gross domestic product, the Federal Statistical Office regularly publishes the real value of the gross domestic product. The difference in the two key indicators is the terms-of-trade effect. The article presents the current quarterly results. They show that in Germany in 2016, the purchasing power of the income generated in the domestic economic process increased at a faster pace than the real gross domestic product for the fourth time in a row. However, this is only the case when looking at the average for the year, which mainly reflects the oil price-related improvement of the terms of trade of the winter half year 2015/16 and is thus an overhang phenomenon. In the course of the year’s economic development, it is clear that the expansion of real income was weaker since the second quarter of 2016 due to terms-of-trade losses in connection with the increased price for oil and the depreciation of the euro compared to price-adjusted gross domestic product. The real value of GDP rose by only 0.7% from the second to the fourth quarter of 2016, seasonal and calendar adjusted, whereas price-adjusted GDP rose by 1.0%. Since last spring, economic momentum in Germany, as measured by the economic growth of aggregate real income, has been slightly lower than is reflected in the current quarterly rates of price-adjusted gross domestic product.