"It's a positive surprise and overall the German economy has been steering the course in the second quarter. This is backward looking of course and we can see that net exports contributed to growth, but it's very likely in the second half of this year that domestic demand will be picking up again and it will be strong enough to weather any negative impact from Brexit".
- Andreas Rees, UniCredit SpA
Economic growth in the Euro zone's largest economy, Germany, contracted in the Q2 2016, flash reading revealed on Friday. As reported by the Federal Statistical Office (Destatis), the economy expanded a seasonally adjusted 0.4% in the reported quarter, after rising 0.7% in the Q1 2016. Nevertheless, market analysts anticipated a deceleration to 0.3% in the Q2 2016. German GDP growth in the Q2 was mainly supported by rising exports, as well as private and government consumption, Destatis said. Furthermore, the annual gauge on a non-seasonally adjusted basis revealed a 3.1% expansion in the Euro zone's powerhouse in the same quarter, compared to the preceding quarter's upwardly revised reading of 1.5%.
In the meantime, separate data from the Federal Statistics Office showed on Friday that consumer price inflation in the Euro zone's number one economy accelerated last month. Consumer prices in Germany rose 0.4% year-over-year on a non-seasonally adjusted basis in July, following the 0.3% increase seen in the previous month. On a monthly basis, the CPI grew 0.3%, up from June's 0.1%. Both readings came in line with the flash estimates and analysts' expectations. The primary objective of the current monetary policy run by the European Central Bank is to maintain annual inflation rates below, but close to, 2% over the medium term.
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