Modest growth seen for Germany

11th August 2004, Comments 0 comments

11 August 2004 , BERLIN - Germany is likely to have chalked up a modest 0.5 per cent growth rate in the second quarter when government data is released Thursday, analysts say. This will be the nation's fastest growth rate in about three years with a robust performance by the country's key export machine helping to drive the German economy to a year-on-year growth rate of about 1.9 percent for the quarter as the global economy picked up speed. First-quarter German GDP came in at 0.4 percent. Indeed, exports

 11 August 2004

BERLIN - Germany is likely to have chalked up a modest 0.5 per cent growth rate in the second quarter when government data is released Thursday, analysts say.

This will be the nation's fastest growth rate in about three years with a robust performance by the country's key export machine helping to drive the German economy to a year-on-year growth rate of about 1.9 percent for the quarter as the global economy picked up speed. First-quarter German GDP came in at 0.4 percent.

Indeed, exports have been the key driving force behind growth in Germany, helping to haul the nation out of three years of economic stagnation.

But Thursday's German data, which will also set the stage for the release of a similar set of figures from the 12-member eurozone as a whole, is also likely to underscore the growing gap between domestic demand in Germany and its export sector.

Faced with an unemployment rate of 10.5 percent, rising oil prices, a dip in disposable income and an ongoing debate about welfare reform in Germany, consumers have been shying away from the nation's shops and car showrooms with consumer confidence falling to a one-year low in July, a key survey of consumer sentiment showed.

With consumer spending representing about 50 percent of the German economy and a turn around in the labour market not expected until possibly early next year, economists are predicting a continuation of Germany's two-speed growth this year with exports edging up and household expenditure stagnating.

Data released Monday showed gross domestic product in Italy, the eurozone's third biggest economy expanding by 0.3 percent in the second quarter, down from 0.4 percent in the first three months of the year.

Figures to be released Thursday are also forecast to the currency bloc's second biggest economy, France growing at 0.6 percent in the second quarter.

Analysts said that evidence that growth in the eurozone is sustaining its clip could help the European Central Bank to mount a case for bringing forward an interest rate hike, in particular if soaring oil prices threatening to further drive up inflation in the currency bloc.

At the moment, economists believe that the ECB will keep its benchmark refinancing rate at its current post-war low of two per cent until early next year.

But while Germany has acted as a drag on eurozone growth in recent years, some analysts believe that Thursday's German data will point to the nation's eventually closing the growth gap with the eurozone and to outpace the 12-member currency bloc next year.

Official data to be released Friday is forecast to show the eurozone's growth to have been flat in the second quarter coming in at 0.6 percent quarter on quarter to produce a year-on-year growth rate of about two percent.

In the meantime, a recent batch of German data have raised concerns that the upturn in the world economy paused in recent months with the figures showing even Germany's exports weakening in June.

While exports rose 16.1 percent year on year, month on month they fell by 5.8 percent in June. This followed the release data showing key German factory orders dropping by a larger-than-expected 3.5 percent in June and production falling by 1.9 percent during the same month.

DPA

Subject: German news
 

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