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UPDATE 1-Resurgent foreign trade seen helping drive German Q2 growth
August 12, 2015 / 11:09 AM / in 2 years

UPDATE 1-Resurgent foreign trade seen helping drive German Q2 growth

* German Q2 GDP seen rising by 0.5 pct q/q -Reuters poll

* Germany exported more goods in Q2 than Q1 -economy ministry

* Private consumption to continue providing support (Adds detail, context)

By Michelle Martin

BERLIN, Aug 12 (Reuters) - Germany’s economic output probably increased between April and June as foreign trade became a second pillar of support for Europe’s largest economy alongside strong private consumption, the economy ministry said on Wednesday.

German firms shipped far more goods abroad in the second quarter than in the first thanks to a moderate recovery in the euro zone and strong price competitiveness, so foreign trade - which has traditionally propelled the economy but was a drag at the end of 2014 and in early 2015 - provided positive impetus for growth, the ministry said in its monthly report.

Preliminary second-quarter gross domestic product data is due to be published on Friday and economists are expecting it to show growth picking up to 0.5 percent after a disappointing 0.3 percent in the first.

“Overall, German economic activity probably increased significantly again in the spring,” the economy ministry said in its report, adding that the Greek debt crisis and volatility on the Chinese stock markets had failed to hit the mood in Germany’s corporate boardrooms.

It said private consumption would remain a key growth engine given that consumers are benefiting from a robust labour market and rising real wages.

Others are, however, less optimistic. Capital Economics has forecast that growth will slow to 0.2 percent as it sees industrial production shaving up to 0.2 percentage points off GDP growth and a drop in retail sales suggesting household spending growth might be weaker and counter what is likely to be a small positive contribution from foreign trade.

The finance ministry has also sounded cautious, saying in a report last month that GDP was likely to increase at around the same rate as between January and March.

The latest data from Germany has been a mixed bag, with exports and industrial output falling in June, though industrial orders recorded their biggest gain since early 2011 in the April-June period - a sign that manufacturing could gain traction in the third quarter.

Data published on Wednesday showed that a sharp fall in German industrial activity was partly to blame for a 0.4 percent drop in the euro zone’s industrial output on the month in June.

Forward-looking sentiment indicators have painted a mixed picture too. The mood among investors worsened in August due to angst over the unstable global economic outlook but consumer morale remains very strong and firms were feeling more optimistic in July.

The economy ministry said indicators pointed to investment activity being “rather subdued” in the second quarter and construction activity fell. (Reporting by Michelle Martin and Madeline Chambers; Editing by Robin Pomeroy)

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