2018.08.2408:50:00UTC+00Germany Q2 GDP Expands On Domestic Demand

Germany's economy expanded at a faster pace as initially estimated, led by domestic demand, in the second quarter, detailed data from Destatis showed Friday.

The largest euro area economy grew 0.5 percent sequentially, following the 0.4 percent increase in the first quarter. The rate came in line with the estimate released on August 14.

On a yearly basis, gross domestic product advanced at a faster pace of 2.3 percent after expanding 1.4 percent a quarter ago. Meanwhile, the calendar-adjusted GDP growth slowed slightly to 2 percent from 2.1 percent. Both annual rates matched expectations.

The expenditure-side breakdown of GDP showed that positive contributions mainly came from domestic demand.

Household spending rose 0.3 percent, slower than the 0.5 percent rise a quarter ago. Meanwhile, government spending rebounded 0.6 percent, in contrast to a 0.3 percent drop in the preceding period.

At the same time, growth in gross capital formation increased to 2.6 percent from 0.9 percent. Fixed capital formation in machinery and equipment climbed 0.3 percent and in construction 0.6 percent.

Overall, domestic uses increased markedly by 0.9 percent.

Exports recovered 0.7 percent, reversing a 0.3 percent fall in the first quarter. Likewise, imports climbed 1.7 percent after falling 0.2 percent.

Defying the often-heard international criticism, the economy is already showing a very balanced growth model, Carsten Brzeski, an economist at ING-DiBa, said.

Earlier this week, the Bundesbank said the German economy is likely to remain on a sound growth path in the third quarter, but the pace of growth could end up being somewhat slower than the average for the first half of the year.

Purchasing Managers' survey showed that Germany's private sector expanded at the fastest pace in six months in August on strong new business and job creation.

Another report from Destatis revealed that net lending of general government amounted to EUR 48.1 billion in the first half of 2018. When measured as a percentage of the gross domestic product, public sector surplus was 2.9 percent.