German Trade Bolsters Economic Growth as Investment Declines

  • Exports surged in second quarter while imports dropped
  • Investment slumped after strong gains at start of year

Trade was the main driver of German economic growth in the second quarter as domestic demand suffered from a slump in investment.

Net trade contributed 0.6 percentage point to growth, with exports rising 1.2 percent and imports falling 0.1 percent, the Federal Statistics Office in Wiesbaden said on Wednesday. Private and government spending also bolstered output. Gross domestic product rose a seasonally-adjusted 0.4 percent in the three months through June, in line with an Aug. 12 estimate.

Germany’s performance in the second quarter offset stagnation in Italy and France and supported euro-area growth before the U.K.’s Brexit vote in June. While the Bundesbank predicts a solid increase in German exports and a pickup in investment and consumption in the months ahead, companies have delivered more cautious messages on the outlook for demand.

“Private consumption should remain an important growth driver on the back of low inflation, low interest rates, low unemployment and higher wages,” said Carsten Brzeski, an economist at ING-Diba AG in Frankfurt. “The economy’s Achilles’ heel, however, remains the lack of new investment.”

Business Confidence

A survey of purchasing managers on Tuesday showed Germany’s economy lost some momentum in August as manufacturing cooled and the services sector posted its weakest performance in 15 months. Still, growth is running at a quarterly rate of 0.5 percent, IHS Markit said.

The Ifo research institute will release its business climate index on Wednesday. Economists predict a slight improvement this month after the gauge deteriorated less than anticipated in July.

In the second quarter, capital investment subtracted 0.3 percentage point from GDP expansion, with private and government consumption adding 0.1 point each, according to the report.

We “expect investment to come back in the third quarter,” Christian Melzer, an economist at Dekabank, said before the data. “Unemployment is exceptionally low in German and inflation also remains low, which should help fuel consumption.”

The government had a budget surplus of 18.5 billion euros ($21 billion) or 1.2 percent of GDP in the first half of 2016, the statistics office said.

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