German Growth Quickened, but Slowdown Looms

German economic growth accelerated in the third quarter, boosted by construction and equipment investment and a small gain in private consumption, preliminary Federal Statistics Office data showed on Wednesday.

Gross domestic product increased by 0.7 percent in seasonally adjusted terms compared with the second quarter, in line with the mid-range forecast of 42 economists polled last week (ECONDE) and confirming a report by Reuters on Tuesday.

"On a seasonally-adjusted basis compared with the previous quarter, growth impulses in the third quarter came from domestic demand: more was invested in equipment and buildings," the Office said.

"Expansion was also supported by a moderate gain in private consumption," it said, adding that, unlike in the second quarter, net trade had not provided any support for growth due to a big gain in imports.

In the second quarter, the economy expanded 0.3 percent, after growth of 0.5 percent in the first three months of the year, the Office confirmed.

Europe's largest economy grew by 2.9 percent in 2006, the fastest pace in six years, and the government expects healthy expansion of 2.4 percent this year.

Profits Climbing

German firms have been reaping the benefits of solid growth, corporate results show. Around three quarters of companies whose shares make up the German DAX top-30 stocks index have reported profits above market expectations in the quarter to end-September.

Salzgitter, Germany's second-largest steelmaker, boosted underlying nine-month pre-tax profit from operations by 48 percent, the company said on Wednesday.

However, the recent leap in oil prices, the euro's surge to record highs against the U.S. dollar and difficulties on global credit markets have depressed business and consumer confidence in recent months and prompted warnings of a significant slowdown in growth next year.

Andreas Rees, an economist at UniCredit in Munich, said there would be a noticeable cooling in the German economy in coming months.

"The reason is the large external burdens, like the strong euro and the high oil price," Rees said.

German GDP increased by 2.4 percent from a year earlier in the third quarter, slightly less than the 2.5 percent recorded in the second quarter, the Statistics Office said. Growth of 2.5 percent had been forecast for the third quarter.

Adjusted for working days, GDP increased by 2.5 percent on the year. The Office is due to publish a breakdown of the third-quarter GDP figures on Nov. 22.