The second estimate of German GDP growth in the second quarter of the year confirms that the economy fell back into contraction, shrinking by 0.1% quarter-on-quarter, from +0.2% QoQ between January and March. On the year, GDP growth was up by 0.3%.
While private consumption dropped by 0.2% QoQ and investments plunged by more than 2% QoQ, government consumption rose by 1% QoQ. Net exports were also a drag on growth. In fact, the second quarter performance of the German economy looks like a reversal of the first quarter performance.
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The German economy had started the year with some optimism. First-quarter GDP growth was a positive surprise and confidence indicators improved, giving rise to hopes that the pessimism of the last few years was behind us, and that discussions about whether Germany was the 'sick man of Europe' could be put to one side. The truth, however, is that GDP growth in the first quarter was driven by the mild winter weather and a downward revision of fourth quarter GDP. Therefore, it was not what we would call a sustainable and healthy growth story.
With disappointing second-quarter growth and almost all confidence sentiment indicators pointing south, the German economy is currently back where it was a year ago: stuck in stagnation as the growth laggard of the entire eurozone.
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