European Economy. Economic Papers. Germany's growth performance in the 1990's

Figure 1.9: Growth Contribution of Net Exports and Terms of Trade
To a large extent the sluggish development of private consumption can be attributed to the
weak growth of household disposable income (Table 1.11). This emerges clearly from a
comparison with the US and the UK but seems to be true also to some extent for France. The
softness of household disposable income growth in Germany seems, in turn, to be related to
weak employment growth and a subdued development of real wages combined with a
substantial increase in the tax burden.
Regarding government consumption it should be noted that its contribution to growth has
declined in almost all countries, particularly in the more recent past, as can be gathered from a
comparison of the long-term average with the annual average contribution in the period 1996-
2000. Although the growth contribution of government consumption is lowest in Germany,
together with Italy, in relative terms the decline was not more pronounced than for the
EMU/EU partner countries on average. Thus, as far as government consumption is concerned
13
The strong correlation between exports and imports in Germany in combination with the development of the
terms of trade indicates that one of the strategies used by the German export sector in order to cope with the
loss in competitiveness was an increased reliance on cheap imported intermediate products.

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28
budgetary restraint in the second half of the 1990 did not have a differential impact on growth
in comparison with the EMU/EU area as a whole.
Table 1.10: Growth Contributions of Demand Components
D
(1)
F
I
UK
EUR
(2)
EU
(3)
US
JP
Private Consumption (annual averages)
1971-2000
1.3
1.3
1.6
1.8
1.5
1.5
2.3
1.9
1991-2000
1.1
0.8
1.0
1.8
1.0
1.2
2.3
0.9
1991-1995
1.3
0.4
0.5
1.0
0.5
0.6
1.7
1.2
1996-2000
0.9
1.1
1.5
2.6
1.4
1.7
2.9
0.5