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German Growth Slows Quarter-on-Quarter

The pace of growth in Europe's biggest economy slowed from the first quarter to the second quarter, the German government said Thursday as it issued its final numbers on growth for the country of 82 million people.

The Federal Statistics Office, or Destatis, said that gross domestic product rose 0.3% in the April-June period from the first three months of the year. Year-on-year growth slowed to 2.5% from 3.3% in the second quarter of 2006, the agency said.

The quarter-to-quarter and year-on-year figures were in line with the expectations of analysts polled by Dow Jones Newswires and mirrored the preliminary figures that were released August 14.

GDP in the second-quarter was driven in part by exports abroad, not surprising given that Germany is the biggest exporter in the world, ahead of China and the United States.

The persistent strength of the euro -- which recently has hovered around record highs against the U.S. dollar -- carries the risk of European exports becoming more expensive and less competitive.

Destatis said that exports were up 0.9% from the first quarter when they had dropped 0.3%, revised from the original figure of a 1.2% decline. However imports fell 0.9% in the second quarter compared to a 2.1% gain in the first quarter.

"At first glance, the slowdown in the growth dynamic compared to the first quarter directly after the VAT hike appears rather odd," said Alexander Koch, an economist with Unicredit in Munich, referring to the rise in the value-added tax from 16% to 19% that took effect Jan. 1.

"However, when looking at the details it emerges that this doesn't mean an abrupt end to the solid upswing," he said, noting that mild winter weather and more production balanced a soft buying mood by German consumers.

Germany has been emerging over the past two years from a lengthy period of economic stagnation that pushed up unemployment and prompted Germans to tighten their purse strings.

Looking forward, Koch said that German businesses have vibrant order books and are hiring, along with the fact that German consumers are buying more goods, too. Destatis said that private consumption in the second quarter rose 0.6% compared to a 1.8% decline the quarter before.

Contact Europe: Economy

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