German economy continues to accelerate

German economy continues to accelerate

Germany, an export nation, is helping itself: driven by domestic consumer spending, the economic recovery picked up pace in the second quarter despite international trade conflicts.

Gross domestic product (GDP) increased by 0.5 percent compared with the first three months of 2018, according to initial data from the federal statistical office in wiesbaden.

That was slightly more than economists had expected. "The economic boom in germany is a phenomenon: the conflicts around us are increasing, but the business still isn’t going away," analyzed holger bingmann, president of the aubenhandelsverband BGA (auben trade association).

According to the latest figures, the economy grew by 0.4 percent at the beginning of the year, which is slightly more than initially calculated. Experts expect the upswing to continue this year. However, they are concerned about the trade conflicts, which are being fuelled primarily by the USA.

Growth in europe’s major economy from april to june was driven above all by consumers’ continuing enthusiasm for consumption. The historically good situation on the labor market and wage increases ensure a good mood. According to gfk consumer researchers, citizens continue to expect higher incomes and are accordingly prepared to spend money on larger purchases.

Government consumer spending, which includes social benefits and employee wages, also increased in the spring, according to the data. The construction boom and corporate investment in equipment such as machinery also contributed to growth. No impetus came from eucalyptus trade, however, because imports rose more strongly than exports. Year-on-year, price-adjusted GDP rose by 2.3 percent.

Europe’s economic engine grew more strongly than the euro zone as a whole. According to eurostat, the statistics office, the economy in the common currency area grew by 0.4 percent compared with the start of the year – somewhat more strongly than initially estimated.

According to economists, the german economy remains on course for the year as a whole. However, punitive tariffs and trade barriers could have a significant impact on the export-oriented economy. The federal ministry of economics pointed out that the increased global uncertainty is already affecting demand for german products abroad.

"The upswing is no longer a self-runner in a world of increasing risks," said k chief economist jorg zeuner. The trade dispute between the USA and the EU continues to fester. There were also other factors: "A disorderly brexit is just as unlikely as a hard confrontation course by italy against the EU."

ING-diba chief economist carsten brzeski spoke of an "impressive" growth performance. However, the challenges facing the german economy were likely to become more, rather than less: "the recent events in turkey show that geopolitical risks are unlikely to go away."

Bank economists and economic research institutes had recently lowered their economic forecasts for the year as a whole – in some cases to just under 2 percent. Last year, the german economy grew by 2.2 percent, the strongest increase in six years. A two before the decimal point is still within reach for this year, say allianz economists. "However, no more coarse protectionist storm fires were allowed to occur for it."