German growth quickens

However, the spectre of a trade war still looms large

FRANKFURT: Germany’s economy looks to have found its feet again after an apparent shaky start to the year, suggesting some of the worries about the outlook may have been overdone.

Delivering on its role as driver of the region’s expansion once again, it recorded growth of 0.5% in the three months through June – better than forecast – and its first-quarter performance was revised higher.

That keeps solid momentum in the euroarea’s largest economy even as companies navigate persistent trade tensions.

The euro rose after the report and traded at US$1.1426. Germany’s benchmark DAX Index was up 0.7% .

While solid domestic demand in Europe’s largest economy has shielded the region so far from the worst effects of global trade tensions, companies are increasingly concerned about the outlook.

New numbers in China hint at a mid-year rough patch for growth, and there’s also turmoil in Turkey that’s sent the lira down 40% this month and spread to other emerging markets.

Germany’s statistics office said second-quarter growth was bolstered by an increase in private and government spending. Equipment investment and construction gained “somewhat.” Imports rose stronger than exports.

“The data are a testament to the strength of the domestic economy, but it shouldn’t be read as a sign that the German economy is completely insulated from the external threats that are still looming,” said Oliver Rakau, chief German economist at Oxford Economics in Frankfurt. “It’s more a question of when they’ll really hit.”

The spectre of a trade war still looms large, even after the European Union and the United States pledged not to introduce new levies as long as negotiations to lower trade barriers are ongoing.

The ECB said last week that if all threatened measures are implemented, the average US tariff rate would rise to levels not seen for 50 years.

Carmakers including Volkswagen AG, Daimler AG and BMW AG have warned against the fallout from increased trade tensions. Some other German companies have expressed optimism.

HeidelbergCement AG confirmed its outlook for 2018 even after negative currency effects damped second-quarter revenue, and cargo container shipping company HapagLloyd AG predicted a better second half and said trade tensions haven’t yet left a mark on business.

German data come after the euroarea’s second and third-largest economies disappointed in the second quarter.

French growth unexpectedly failed to accelerate, after a series of national strikes dragged down output. Italy’s expansion slowed to the weakest in almost two years.

Dutch growth exceeded expectations with a pickup to 0.7%. — Bloomberg