German economic growth may slow further in the second half of the year as the sovereign debt crisis takes its toll, the Bundesbank said.
“The prevailing uncertainty in the euro area could have a more negative impact on economic activity in Germany in the second half of the year,” the Bundesbank said in its monthly report published today in Frankfurt. “However, as long as demand for German products from non euro-area countries remains essentially intact, a reversal of the cyclical trend in Germany is highly unlikely.”
Growth in Europe’s largest economy slowed to 0.3 percent in the second quarter from 0.5 percent in the first as demand from euro-area trading partners waned. At the same time, companies are tapping faster-growing markets outside Europe and unemployment at a two-decade low is bolstering domestic spending.
“In addition to ongoing strong construction activity, the outlook for private consumption remains favorable,” the Bundesbank said.
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