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German economy defies crisis

August 14, 2012

Germany keeps defying the eurozone debt crisis, with the country's growth figures providing more proof it can keep recession at a distance. But analysts say the end to the good news from Germany is already in sight.

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Working supervising a computer-controlled production facility
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Germany's economy posted a stronger-than-expected growth rate for the second quarter of this year, official data showed on Tuesday. Gross domestic product in Europe's economic powerhouse increased by 0.3 percent in the three months that ended in June.

Analysts had largely expected the economy to grow by only 0.1 percent, given the protracted eurozone debt crisis and a difficult business environment globally. Second quarter growth was less than the 0.5 percent gain reached in the first quarter of 2012.

The release of the German data coincided with the publication of French figures which showed the eurozone's second-biggest economy stagnating for the third consecutive quarter.

Bumpy road ahead

"The latest German GDP data are remarkable, not to say impressive," UniCredit Chief Economist Andreas Rees told DPA news agency. "Once again, the German economy managed to perform far better than its peers in the euro area."

Overall, the German economy is expected to grow by up to 1.0 percent throughout 2012, but there are a few dark clouds on the horizon already. Business confidence for instance dropped to a 28-month low in July, a closely watched sentiment survey revealed last month.

"Growth turned out to be pretty solid again," Commerzbank Economist Jörg Krämer commented. "But this could be the last positive piece of news out of Germany for some time."

hg/jlw (Reuters, dpa)