German economic growth may have weakened slightly in the second quarter, but exports are holding up well and net trade probably contributed to growth despite the strong euro, the finance ministry said today.
Economic expansion probably slowed in the April-June period from the 0.5 per cent quarterly pace at the beginning of the year, but the outlook for the next few months remained good, the ministry said in its monthly bulletin for July.
Manufacturing is likely to have made a smaller contribution to growth in the first quarter and construction activity may have suffered due to Jan. 1's three percentage point increase in value-added tax to 19 per cent, it added. "Nevertheless, the chances of a continuation of the upswing are good," the ministry said.
Both domestic and foreign demand were strong and sentiment indicators were holding at high levels, supported by rising employment, it added. Europe's biggest economy expanded at the strongest pace in six years in 2006, helped by surging corporate investment, solid demand from abroad for German goods and the beginnings of a pickup in long-stagnant household consumption.
Most analysts expect growth to come close to matching that this year, although the strength of the euro and soaring energy costs are seen as significant risks. Europe's common currency was steady just above $1.38 on Thursday after reaching a record $1.3834 yesterday.
Exports had nonetheless been stable at a high level since last September and the prospects of a further pickup were good, the ministry said, pointing to upbeat expectations among respondents to the Ifo institute's business climate survey.