Published: Wed, August 16, 2017
Markets | By Lucia Cruz

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

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

The euro area economy expanded as initially estimated in the second quarter, flash estimate from Eurostat showed Wednesday.

"The press release from the statistical office confirms our story that domestic demand was the main driver of growth in Q2 - mainly household and government spending - while net exports slowed", said Claus Vistesen at Pantheon Macroeconomics.

As a outcome, and following revisions to GDP data before 2017, economists at Commerzbank raised their growth forecast for the German economy to 2% this year from an earlier estimate of 1.6%.

In the second quarter, the eurozone economy grew by a quarterly rate of 0.6 percent.

"Stronger domestic consumption, higher imports, more state spending - all of this had been asked of Germany to reduce the imbalance within the euro-area and with the United States", they said in a client note.

German chancellor Angela Merkel will lead the Christian Democrat party (CDU) into next month's elections have presided over 12 straight quarters of growth.

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Germany's growth performance did little to alter the path of the euro, which has moved tentatively lower since the beginning of August.

In the second quarter, growth was driven by domestic demand, the statistics office said.

"The development of foreign trade, however, had a downward effect on growth because the price-adjusted quarter-on-quarter increase in imports was considerably larger than that of exports", it added.

The economy expanded 2.1% from a year earlier. when adjusted for working days.

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.

"All in all, the German economy is still thriving and now the biggest risk is probably policy complacency", said Carsten Brzeski, an economist at ING.

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