German GDP growth offers positive surprise

German GDP rose by 0.4% in the second quarter of 2016, representing a positive surprise for analysts, who anticipated a stronger slowdown following the 0.7% rise in the first quarter of 2016.

According to the German Federal Statistical Office Destatis, growth was mainly driven by positive contributions on thr trade balance, with exports rising at a faster rate than imports. Other positive contributors were household final consumption expenditure and government final consumption, while growth was slowed down by weaker gross capital formation.

The price-adjusted GDP rose 3.1% in the second quarter of 2016, which was the largest increase in five years. Adjusted for the exceptionally high calendar effect, the GDP growth was 1.8%.

Destatis also revealed that GBP growth was achieved by 43.5m people in employment, reflecting a 1.2% increase of the German workforce compared to the previous year.

Katrin Löhken, senior analyst Macroeconomics at Sal. Oppenheim comments on the results: The domestic econmomy, household consumption in particular remains a stable driver, added to that are improved export figures. Luckily, the early indicators suggest that consumer and businesses appear to have kept their calm on the Brexit decision, nevertheless, we expect the economic mood to weaken somewhat over the coming months.”

“The outlook for the backbone of the German economy, exports, will become more challenging. Even if Brexit has not let to major uncertainities, the weak pound is nevertheless beneficial for British exporters, not Germans. Moreover, demand from key export markets is expected to be weak China in particular, which continues to grow at a slower rate.”

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