German economy propped up by domestic demand as trade drags

A German flag flutters next to the dome of the Reichstag building, seat of the German lower house of parliament Bundestag, in Berlin, October 2013. (Reuters pic)

BERLIN: Strong domestic demand drove Germany’s economic expansion in the months leading up to the summer, mitigating a drag from trade as imports outpaced exports.

A breakdown of second-quarter gross domestic product data showed government spending jumped 0.6% and private consumption rose 0.3%. Overall economic growth, confirmed at 0.5%, was also supported by a 0.5% increase in capital investment, mostly led by construction.

Net trade knocked 0.4% point off gross domestic product, with exports rising 0.7% and imports gaining 1.7%.

The country’s solid performance in the three months through June has helped alleviate concerns that a slowdown in the first quarter would persist, and is shielding the wider region from global trade tensions. Still, several corporate heavyweights in Germany have expressed concern over the outlook, with growth in China slowing and emerging markets experiencing a drag from turmoil in Turkey.

The Bundesbank says German expansion is likely to cool this quarter, though the economy remains on a “sound growth path.”

The 19-nation euro-area expanded 0.4% in the second quarter, and a GDP breakdown will be published on September 7. The European Central Bank, which has announced a plan to begin winding down some of its stimulus, will hold its next policy meeting the following week.