Rising exports and consumer demand helped inoculate the German economy, Europe's biggest, against the recession plaguing many of its neighbours, but investor confidence is fading, data showed Tuesday.
The national statistics office Destatis calculated that German gross domestic product (GDP) expanded by 0.3 percent in the period from April to June, while the eurozone economy as a whole contracted by 0.2 percent.
At the start of this year, Germany had notched up even stronger growth of 0.5 percent, but the economic powerhouse is beginning to feel the effects of the long-running debt crisis that has pushed much of Europe into recession.
Destatis attributed Germany's solid performance to robust household spending and rising exports.
"Positive impulses came from both consumer spending and from net foreign trade," the statisticians said in a statement.
"According to preliminary data, exports grew somewhat faster than imports. Furthermore, both private and public spending was higher than in the preceding quarter, helping to offset a decline in investment," they said.
While many of Germany's eurozone partners are teetering on the edge of or are already in recession, the bloc's economic giant is continuing to expand, thanks largely to deep structural reforms implemented a number of years ago.
However, with much of Europe in the doldrums, German exports, too, are beginning to falter and some analysts believe overall growth could soon grind to a halt.
A raft of recent economic data -- ranging from foreign trade statistics to industrial orders, new car registrations and business confidence -- suggests that Germany's growth momentum is indeed fading.
The storm clouds darkened further on Tuesday with the release of the widely watched ZEW index, a barometer of investor confidence, which fell for the fourth month in a row this month, reaching the lowest level since December 2011.
"Financial market experts ... expect the German economy to cool down throughout the next six months. Especially export-oriented sectors may be affected," the ZEW warned.
The data were worse than expected and a separate index measuring financial market players' assessment of the current economic situation slumped to its lowest level in two years.
Commerzbank chief economist Joerg Kraemer said the second-quarter GDP numbers were "likely to have been the last good figures from Germany for a while. Both falling orders and survey-based economic indicators suggest that the German economy will contract somewhat in the third quarter."
Timo Klein at IHS Global Insight said the "negative impact of unsettling debt crisis developments in the eurozone has finally become more burdensome" for Germany.
"Future developments in the eurozone debt crisis will remain critical for Germany's economic outlook, as any disorderly Greek sovereign default and/or euro exit could create serious contagion effects on other eurozone countries in trouble, notably Spain," Klein said.
"That being said, the major players -- the ECB, governments and banks -- have been buying additional time in recent months, not least in order to be able to prepare for potential disruptive events, so that we would still expect the negative impact on the real sector in Germany to remain more limited than after the Lehman Brothers shock in late 2008," the analyst concluded.
"There is no question of recession in Germany," said Berenberg Bank economist Christian Schulz.
The strength of consumer demand was no surprise given the strong labour market in combination with lower inflation rates, he argued.
That strength was likely to last and the dip in investment should also prove temporary, Schulz argued.
"In the short-term, the euro crisis is likely to negatively affect German growth. But the crisis will eventually be back under control and confidence will start improving. Germany is likely to benefit from this very quickly and the economy should be growing healthily by the fourth quarter already," Schulz predicted.
Source: http://news.yahoo.com/german-economy-beats-expectations-0-3-growth-084931701.html
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