German growth slower, but still strong ahead of election

Germany's economic growth slowed in the second quarter as exports cooled, official data showed Tuesday, but strong domestic demand helped to keep Europe's powerhouse humming just weeks before a general election. Germany's gross domestic product (GDP) expanded by 0.6 percent from April to June compared with the previous quarter, adjusted for price, seasonal and calendar effects, federal statistics authority Destatis said.

The provisional figure was lower than the 0.7 percent forecast by analysts surveyed by Factset. "The German economy continues to grow," Destatis said in a statement, noting that the expansion was driven by household consumption, government spending, investments and the construction sector.

"The development of foreign trade, however, had a downward effect on growth because the price-adjusted quarter-on-quarter increase in imports was considerably larger than that of exports," it added. Figures released by Destatis last week showed that German exports unexpectedly fell by 2.8 percent in June compared to the month before. But analysts saw little cause for concern, noting that record-low unemployment and high wages had helped push up demand for imports. "Germany's economic success story goes on and on and on," said Carsten Brzeski of ING Diba bank.

"And there is very little reason to fear a sudden end to the current performance, even though some kind of slowdown from current growth rates looks almost inevitable." Analysts at LBBW said the quarter-on-quarter increase in imports was just another sign of an economy in robust health and should go some way towards silencing critics of Germany's massive trade surplus. "Stronger domestic consumption, higher imports, more state spending -- all of this had been asked of Germany to reduce the imbalance within the euro-area and with the United States," they said in a client note.

The continued upswing will likely bolster Chancellor Angela Merkel ahead of the September 24 vote, with polls giving her conservatives a double-digit lead over their junior coalition partners, the Social Democrats. "With today's strong growth data, it will be hard for any opposition party to pick out the economy as a main theme for the final stage of the election campaign," said Brzeski.

-AFP, Frankfurt