‘Alive and kicking’: German economy shifts into high gear
BERLIN: The German economy picked up more pace than expected in the second quarter, driven by higher household and state spending, suggesting that it is powering ahead despite the threat of a major trade dispute with the United States.
Gross domestic product rose 0.5 percent quarter-on-quarter in April-June, the Federal Statistics Office said yesterday, beating economists’ consensus forecast of 0.4 percent in a Reuters poll.
The office also revised up the quarterly growth rate for the first three months of the year to 0.4 percent from 0.3 percent. Fears of a full-blown trade war between the European Union and United States deepened during the second quarter. However, these eased last month after US President Donald Trump met European Commission President Jean-Claude Juncker.
In a further positive sign, German investor morale improved more than expected in August following the Washington meeting, the ZEW institute said.
“Despite all of the prophecies of doom, the upswing is not only alive, it’s also kicking,” Bankhaus Lampe economist Alexander Krueger said. “For the time being, the upswing is unlikely to be stalled by the global trade dispute or overheating.” The German economy ministry and ZEW researcher Achim Wambach both cautioned, however, that Germany’s growth outlook remained clouded by Trump’s tariff threats. The government forecast 2.3 percent economic growth this year and 2.1 percent for next. This would be well above Germany’s average pace of the past 10 years.
On the year, the German economy grew by 2.0 percent from April to June, calendar-adjusted data showed. Analysts polled by Reuters had expected a 2.1 percent expansion. The Statistics Office said economic growth was mainly driven by higher household spending and increased state consumption. Additional impetus came from investments.
Exports also grew but were outperformed by even stronger imports, suggesting that net trade did not contribute to overall economic growth, the office said.