German Economic Growth Robust Despite Slowdown in Second Quarter

Posted August 16, 2017

Industrial output across the 19 countries that make up the eurozone fell in June, official figures showed Monday, in a development that likely illustrates the export-sapping impact of the rising euro. Though a stronger currency shows that confidence is returning to the eurozone economy, it does have the potential to weigh on exporters as it increases the price of their goods in global markets, all other things being equal.

"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. This compared with a consensus forecast of 1.9 percent.

The preliminary estimate showed GDP growth rose by 0.6% between April-June compared with the same period previous year. "The German economy is proving its staying power, the upswing continues", Bankhaus Lampe economist Alexander Krueger said, adding that the European Central Bank´s low interest rates were boosting the economy.

Despite the June fall, industrial production was still a healthy 2.6 percent higher compared with a year earlier, though down on May's 3.9 percent annual rate.

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Perhaps the most astonishing growth was reported in the Czech Republic, where GDP expanded by an impressive 4.5 percent on the year in the second quarter, some 1.5 percentage points above forecasts and up from 3 percent in the first quarter of the year. She's seeking a fourth term in September.

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

The German economy has so far expanded in 16 of the past 17 quarters - putting it on track to beat a late-1970s record for the longest-ever recovery. The FT said France had 0.5% growth, while Spain also had its best measure in three years with a 0.9% increase.