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German Economy Expands On Domestic Demand


Germany's economy continued to expand in the second quarter, with the latest growth driven by domestic demand and investment.

Gross domestic product grew 0.6 percent sequentially in the second quarter, Destatis said Tuesday. Although, this was slightly slower than the forecast of 0.7 percent, the economy expanded for the 12th consecutive quarter.

Moreover, the first quarter growth was revised up to 0.7 percent from 0.6 percent.

Data came ahead of the federal election next month. Growth figures bode well for Angela Merkel as she bids for a fourth term as chancellor.

Carsten Brzeski, ING Bank NV economist, said Germany's economic success story goes continues and there is very little reason to fear a sudden end to the current performance.

However, the economist noted that the drivers supporting the domestic economy, like record high employment, higher wages and government consumption, might lose some momentum along the way, without turning negative.

Data showed that domestic demand and capital formation showed positive contributions, while foreign trade had a downward effect on growth. More detailed breakdown of GDP will be released on August 25.

Destatis said both household spending and general government expenditure increased markedly.

Capital formation also advanced in the second quarter. There was an increase in fixed capital formation in machinery and equipment, in construction and in other fixed assets.

However, the development of foreign trade had a downward effect on growth because the sequential increase in imports was considerably larger than that of exports.

On a yearly basis, GDP expanded by a working-day adjusted 2.1 percent, following a 2 percent growth logged in the previous quarter.

This was the biggest expansion since the first quarter of 2014, when GDP grew 2.8 percent and also exceeded the expected rate of 1.9 percent.

Price-adjusted GDP growth came in at 0.8 percent versus 3.2 percent a quarter ago.

In the second quarter, the euro area currency bloc expanded at a slightly faster pace of 0.6 percent after growing 0.5 percent.

by RTTNews Staff Writer

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