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German spending puts economy on track for best year since '11

Aug 25 2017 10:14
Paul Gordon, Bloomberg

Frankfurt - German consumers and the government drove economic growth last quarter, setting the country up for a bumper year despite concerns that a stronger euro will weigh on exports.

Gross domestic product data published on Friday showed households leading the charge as the economy expanded 0.6% in the three months ended June. The growth matched an August 15 estimate and adds to reports this week suggesting that the eurozone’s largest economy is headed for its strongest annual growth since 2011.

GDP component second quarter first quarter

• Private consumption 0.8% 0.4%

• Government consumption 0.6% 0.2%

• Equipment investment 1% 2.7%

• Construction 0.9% 3.4%

• Exports 0.7% 1.6%

• Imports 1.7% 0.4%

Germany’s strength, bolstered by record-low unemployment, is helping drive a recovery in the 19-nation currency bloc that has prompted the European Central Bank to start considering whether it can start to slow its monetary stimulus.

ECB policy makers will meet in Frankfurt on September 7 to discuss the path of their bond-buying program, though investors are on guard for any clues when President Mario Draghi speaks in Jackson Hole, Wyoming, later on Friday.

Germany isn’t immune to the wider concerns of the currency bloc. Wage growth and inflation remain subdued, and the euro’s surge this year threatens to undermine the competitiveness of the country’s exporters.

The Ifo Institute’s index of German business confidence is predicted to show sentiment weakening from a record high when it’s released at 10:00. A measure of investor confidence this month slid more than forecast on concerns over foreign sales and the nation’s widening automaker scandal.

Still, a purchasing managers survey published this week indicated that the economy is on track to expand by more than 2% this year, and the Bundesbank said growth may be stronger than the 1.9% it forecast in June.

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