"New growth hopes for the rest of the euro zone are stimulating German confidence, which in turn could lead to higher German economic growth"
- Carsten Brzeski, an economist at ING Groep NV
A sharp rebound in Europe's largest economy in the second quarter, boosted by a pickup in investment and robust consumption, is dispersing clouds from the struggling Eurozone. On Friday market sentiment was pushed higher by a massive growth of German economy, as the seasonally-adjusted gross domestic product expanded 0.7%, in line with flash reading released a week earlier, and up from the previous quarter's growth of 0.1%. From a yearly perspective, the economic output advanced 0.9%, compared with a unimpressive downwardly revised 1.6% contraction in the prior quarter.
Meanwhile, investment in plant and machinery ticked up 0.9%, posting the first increase since 2011, while construction output soared 2.6%. In addition to that, household spending gained 0.5% and government consumption was 0.6% higher. The last but not least, shipments from Germany advanced 2.2%, while imports rose 2%. Sentiment among German businesses improved for a third straight month in July, signalling the economy is one the track for a sustained upswing after last year's sluggish performance. The German Bundesbank also pointed out that German expansion should normalize and stabilize in the rest of the year, expecting a 0.3% growth for this year and acceleration up to 1.5% in the next one.
© Dukascopy Bank SA