Monday 16 July 2018

German economy accelerates slightly as France stagnates

Germany's economy expanded in the second quarter of the year
Germany's economy expanded in the second quarter of the year

German economic growth accelerated in the second quarter of 2015 but by less than expected, with foreign trade acting as a support and domestic investment braking growth, the Federal Statistics Office said today.

The economy grew by 0.4pc in the quarter between April and June after expanding by 0.3pc in the first three months of 2015. The consensus forecast for the second quarter in a Reuters poll was for 0.5pc growth.

Unadjusted data showed the economy expanded by 1.6pc on the year in the second quarter, surpassing the Reuters consensus forecast for 1.5pc growth.

"Supported by the weak euro, exports rose much more strongly than imports according to preliminary calculations," the Statistics Office said in a statement.

Business confidence improved in July after two monthly drops as an agreement between Greece and its creditors for talks on a third bailout lifted the mood at firms.

Around half of Germany’s 30 blue-chip companies reported consensus-beating financial results for the April-June period. More than two thirds nonetheless stuck with their guidance for the year as a whole as geopolitical and economic uncertainties remain for the second half of the year.

In positive news for the economic outlook, figures released last week showed industrial orders recorded their biggest gain since early 2011 in the April-June period thanks mainly to strong foreign demand.

However, the French economy stagnated in the second quarter. According to the country’s statistical agency, Insee, GDP was unchanged from the first quarter to the second.

That was below forecasts of a 0.2pc rise and marked a sharp slowdown from the 0.7pc jump in the first quarter. Insee previously estimated a 0.6pc rise in the first quarter.

"While the euro zone economy seems to see some signs of rebalancing, with the stagnation in France and strong growth numbers from Spain and Greece, Germany remains an almost boring beacon of reliability," ING economist Carsten Brzeski said.

However, Germany's heavy foreign trade exposure may turn from a strength to a risk given the angst about the global outlook.

The mood among analysts and investors in Germany worsened in August due to concerns about the effect of an unstable global economic backdrop on the country's export-dependent economy, a survey showed on Tuesday.

Some German industrial companies have made upbeat earnings announcements. German auto parts and tire maker Continental this month raised its full-year profit outlook after quarterly earnings jumped more than expected on a strengthening European car market.

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