German economy, Europe's largest, posts 0.6 pct 2Q growth

Posted August 16, 2017

Germany's economic growth slowed in the second quarter as exports cooled, official data showed Tuesday, but strong domestic demand helped to keep Europe's powerhouse humming just weeks before a general election.

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

The rise in domestic demand, however, overshadowed a drop in foreign trade, Destatis reported, saying the price-adjusted quarterly increase in imports was considerably larger than that of exports.

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

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

"All things considered, we remain optimistic about the eurozone economy, and forecast above-consensus growth of 2.2 percent this year and 2 percent in 2018", said Jack Allen, European economist at Capital Economics.

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But most forecasters say that Germany's economy should maintain its solid performance in the next few quarters.

ING economist Carsten Brzeski says "though some kind of a slowdown from current growth rates looks nearly inevitable" many signs point to more growth ahead and there's "little reason to fear a sudden end to the current performance".

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

The figure was down from a 0.7 per cent pace in the first quarter and slightly weaker than market expectations of 0.7 per cent.

Germany's economy hence lagged behind the USA, which expanded at an annualized pace of 2.6% in the same period, but slightly outpaced the 2.3% growth in the 19-country euro currency zone.

Destatis will release a detailed report on the second-quarter results on August 25.