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Frankfurt am Main | 21.08.2017

German economy continued to expand vigorously

The German economy continued to expand at a rapid pace in the second quarter. As stated in the Bundesbank's current Monthly Report, gross domestic product (GDP) has therefore been growing considerably faster than potential output since the beginning of the year. "Aggregate overall capacity utilisation, which was already significantly above average, showed a further marked rise", it is stated in the report. According to provisional data from the Federal Statistical Office, real GDP in the second quarter grew by 0.6% on the previous three-month period after seasonal and calendar adjustment compared with 0.7% in the first three months of the year.

As in the first quarter, the strong economic growth in the second quarter was mainly due to the buoyant upturn in industry and construction. According to the report, industrial output moved onto a clear growth path at the turn of the year. This also had a knock-on impact on business-related services sectors, such as the wholesale trade sector. As explained in the Monthly Report, the boom in the construction sector continued and there was a further considerable increase in output.

Growth could be stronger than projected 

The Bundesbank believes that the German economy is likely to continue to grow with strong momentum in the current quarter, too. This is suggested, so the Monthly Report states, by the exceptionally upbeat sentiment among both enterprises and consumers as well as the positive order situation in the industrial sector. The underlying pace of economic activity, which was already quite strong in the previous year owing to buoyant domestic activity, recently accelerated again given a more favourable external environment, the report continues. “Overall, GDP growth in the current year could even be somewhat stronger than expected in the June projection”, write the Bundesbank’s economists. In early June, the Bundesbank projected a 1.9% rise in calendar-adjusted GDP for 2017.

Favourable employment situation

The Bundesbank’s experts assess the situation in the labour market as being consistently very favourable. Employment rose sharply in the second quarter, even though it was not possible to match the extremely rapid pace of growth seen in the final quarter of 2016 and the first quarter of 2017. According to the Monthly Report, the outlook for the next few months remains upbeat. By contrast, wages grew only moderately in the second quarter of 2017, despite the positive labour market situation and the favourable economic situation.

Significant economic growth in the euro area

According to the Bundesbank, the economic upturn in the euro area is also continuing. Economic output also increased significantly in the second quarter, as was the case in the fourth quarter of 2016 and the first quarter of 2017. "The positive sentiment among households and enterprises suggests that the economic upswing is set to continue", to quote from the Monthly Report. According to data from Eurostat, real GDP in the euro area in the second quarter rose by a seasonally adjusted 0.6% on the quarter, and by 2.2% year-on-year. 

Domestic activity increasingly driving economic recovery

In its most recent Monthly Report, the Bundesbank also looks at the significance of foreign and domestic impulses for the economic upswing in the euro area that has now been under way for four years. To this end, the economists use two different methods to analyse the various driving forces behind this economic growth. Both approaches suggest that overall economic growth in the euro area in recent years has been increasingly driven by domestic demand. According to the experts’ findings, however, exports were behind the acceleration in economic growth in the final quarter of 2016 and the first quarter of 2017, as was clearly revealed by a growth decomposition model.

Stable underlying pace of global economic activity

The Monthly Report also looks at global economic developments, which confirms the impression that global economic activity has become stronger. According to the Bundesbank, global economic output is likely to have risen significantly in the second quarter of 2017. The Bundesbank’s experts say that the dip in growth at the beginning of the year was less severe than originally supposed. For the summer months, the Bundesbank is expecting the global economy to grow at a stable underlying pace.

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