Brandenburg Gate in Berlin, Germany

Germany GDP Q2 2018

Germany: Economic activity picks up in the second quarter, but risks persist

A preliminary estimate released by the Federal Statistics Office (Destatis) on 14 August showed that the German economy picked up steam in the second quarter. On a seasonally-, calendar- and price-adjusted basis, the economy expanded 0.5% over the previous quarter, up from the first quarter’s revised 0.4% increase (previously reported: +0.3% quarter-on-quarter). The result slightly overshot market expectations of 0.4% growth in the second quarter. Compared to the same quarter a year ago, the German economy increased 2.3% on a calendar-adjusted basis, which is slightly down from the first quarter’s revised 1.4% (previously reported: +1.6% year-on-year).

The domestic economy spearheaded the quarter-on-quarter result, with growth in both private and public consumption. Fixed investment also expanded due to greater investments in machinery and equipment, and construction. On the external front, although exports and imports expanded over the previous quarter, import growth outpaced export growth. As a result, the external sector likely dragged on economic growth.

Following last year’s strong result, the economy looks poised to record another year of robust growth this year on the back of domestic demand. Looking ahead, the risks associated with an escalation in trade tensions between the European Union and the United States persist, while developments in Turkey in recent weeks highlight further risks to the Eurozone, and thus the German economy. There are concerns that some of the single currency bloc’s biggest banks could be overexposed to Turkey amid the recent freefall of the Turkish lira. At home, there are potential risks to the outlook, too. The political scene remains difficult to navigate, as demonstrated by the row in June between Angela Merkel’s CDU and its Bavarian sister party (CSU) over Germany’s immigration policy, which, in turn, impacted the European Union’s immigration stance. In August, a poll showed waning electoral support for the CDU/CSU bloc as support for the right-wing, anti-immigration Alternative für Deutschland (AfD) reached a new high.

A detailed breakdown of national accounts data will be available on 24 August.

Germany GDP Forecast

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