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Bumper boost to GDP in Germany

Bumper boost to GDP in Germany
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The German economy expanded strongly between April and June, thanks to broad-based domestic demand and solid exports.

A 0.7 percent quarterly rise in gross domestic product came from a flurry of construction work, resuming after the unusually long and cold winter. Companies also increased their purchases of machines and equipment and there was healthy private consumption.

Analysts said Germany’s bounce-back could support the tentative recovery in the eurozone economy.

“The composition of the growth is very good. It is being driven more strongly from within, which is good for Germany and the eurozone,” said economist Holger Sandte at Nordea. “It is also positive that firms are investing more in equipment and are not so hesitant anymore.”

Domestic demand added 0.5 percentage points to GDP in the quarter and foreign trade 0.2 percentage points.

“Growth is broadly supported – two-thirds comes from domestic demand, a third from trade… This could be the start of a long upturn for investment. Low interest rates and returning confidence provide a sound basis for this,” said Christian Schulz at Berenberg Bank.

The Economy Ministry and the Bundesbank have cautioned that growth will probably be more moderate in the second half. They pointed out the bumper second-quarter growth was partly due to the weather-related catch-up effects and that Germany still faces a tough international environment.