German economic growth slows unexpectedly

15th November 2006, Comments 0 comments

15 November 2006, Wiesbaden, Germany (dpa) - German economic growth slowed in the third quarter compared to the first six months of 2006 amid an unexpected decline in business confidence for November, according to economic data released this week The nation's gross domestic product (GDP) grew 0.6 per cent over the previous three months, fuelled by a strong export performance coupled with a rise in domestic investments and private consumption, the Federal Statistics Office said. But the third-quarter increa

15 November 2006

Wiesbaden, Germany (dpa) - German economic growth slowed in the third quarter compared to the first six months of 2006 amid an unexpected decline in business confidence for November, according to economic data released this week

The nation's gross domestic product (GDP) grew 0.6 per cent over the previous three months, fuelled by a strong export performance coupled with a rise in domestic investments and private consumption, the Federal Statistics Office said.

But the third-quarter increase was not as strong as the previous two quarters when the economy grew 0.8 per cent in January-March and 1.1 per cent in April-June, according to the statistics office.

Experts said the new figures put Europe's biggest economy on target for an annual growth rate of around 2.5 per cent for 2006, the best performance since 2000.

"The state of the economy today is much better than it was at the beginning of the year," said Andreas Scheuerle, an economist with Deka Bank. He said there was more investment, which "creates jobs and improves competition."

Government estimates expect the economy to grow 2.3 per cent for the year, but slow to 1.4 per cent in 2007 when the effects of a sales tax rise from 16 to 19 per cent kick in.

At the same time, German investor confidence fell for the tenth month in a row in November, but the drop was not as steep as in previous months, a key indicator showed.

The ZEW index compiled by the Mannheim-based Centre for European Economic Research dipped 1.1 points to minus 28.5 after a 5.2 per cent drop in October and a 22.2 per cent decline in September.

It was the lowest level since March 1993 for the index, which measures sentiment among investors and analysts six months down the track.

The survey appeared to reflect ongoing concerns over the world economy and potential interest rate increases. However, a lower oil price and an upturn in the labour market probably had a favourable effect on expectations.

"The downward trend of expectations seems to have come to a halt," ZEW said, indicating a stabilization of consumer demand will take place in the second half of next year.

ZEW said the index showed the German economy will recover in May 2007 from an expected drop in demand caused by the sales tax hike and other tax burdens due to come into force early next year.

A separate indicator of current conditions in Germany rose to 53 per cent from 42.9 per cent in October.

Meanwhile, Germany's annual inflation rate reached 1.1 per cent in October, an increase of 0.1 per cent over the previous month.

Officials said lower petrol prices and heating costs helped keep the increase below experts' predictions of 1.2 per cent for October.

Last month the annual inflation rate was 1 percent and in August 1.7 per cent.

The September rate was the lowest since February 2004 when annual inflation stood at 0.9 per cent.

DPA

Subject: German news

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