Germany expects solid growth to continue

Germany’s economy weakened at the start of the third quarter after a strong performance in the first half of the year but indicators suggest its solid growth will continue, the finance ministry says.

Europe’s biggest economy is enjoying a consumer-led upswing, propelled by record-high employment, rising real wages and low borrowing costs – conditions that are likely to help Chancellor Angela Merkel win a fourth term in Sunday’s federal election.

The ministry, controlled by Merkel’s conservatives and their veteran lawmaker Wolfgang Schaeuble, said in its monthly report the economy lost some momentum at the beginning of the third quarter.

“But recent economic data indicate that the solid upswing will continue also in the third quarter,” the ministry said, adding business morale remained high and German exporters were expected to benefit from a global economic recovery.

The German economy grew 0.7 per cent in the first three months of the year and 0.6 per cent from April to June, driven by increased household and state spending as well as higher investments in buildings and machinery.

Economic data in the past weeks had painted a mixed picture of the economy, with unemployment continuing to fall and the mood among German investors improving.

But retail sales, industrial orders and manufacturing output disappointed in July.

The ministry said macroeconomic fundamentals remained favourable and domestic demand would continue to drive growth.

The economic upturn is boosting tax income as more people join the labour market, shoppers spend and companies can increase their profits.

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