German growth rises at fastest pace in three years

Bloomberg

Germany's federal statistics office has reported slower growth of the economy in the second quarter of this year.

The economic data pictured Germany as enjoying stable rates alongside other European Union nations.

But overall growth was dampened by net foreign trade since exports rose less strongly than imports, which the vibrant domestic economy sucked in at a higher rate.

Alexander Krueger, an economist at Bankhaus Lampe, said: "The German economy is proving its staying power, the upswing continues".

"The unemployment rate is very low, the economy has done very well particularly by the eurozone standards, so it's quite possible that it will boost support for the incumbent party".

The provisional figure was lower than the 0.7 percent forecast by analysts surveyed by Factset.

Looking ahead, the euro's appreciation in recent months poses a risk to future exports, economists say, as it erodes the global competitiveness of goods produced in the region.


Carsten Brzeski, analyst at ING Bank, said Germany's economic success just went "on and on and on" but he cautioned that exports could be dented by a stronger euro, weaker-than-expected United States growth and Brexit uncertainty.

The German economy extended its growth spurt in the second quarter, playing into the hands of Angela Merkel as she bids for a fourth term as chancellor.

"The same holds for the export sector, where a stronger euro, weaker-than-expected USA growth and Brexit uncertainty could take some wind out of the sails without bringing exports to a halt", Brzeski said.

But he warned against policy complacency, calling it probably "the biggest risk" to Germany's economic momentum.

Destatis also revised upwards its growth estimate for the first quarter of the year to 0.7% from the initial estimate of 0.6%.

Demand from households and government increased "markedly", and capital expenditure on machinery, equipment and in construction and other fixed assets rose compared with the first quarter. A detailed GDP report is due August 25.

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