German GDP Data Comes in Better Than Forecasts

• German Economy in the clear?

Germany, the largest economy in the Eurozone showed very little signs of economic slowing stemming from the Brexit in its most recent gross domestic product data, as data from the country’s statistics office showed Germany’s economic growth rate for the second quarter of 2016 outpacing analysts estimations.

Meanwhile in terms of quarterly adjustments, the German economy grew by 0.4% in the 3 months through June, beating analyst forecast which was pinned at a 0.2% growth and also twice the rate forecast in a survey conducted by Bloomberg. This brings the economy’s expansion over the last year to 1.8%.

In their flash estimate the statistics office did not show a detailed specifics of the release but they said the growth was primarily facilitated by foreign trade. After quarterly growth was reported at 0.7% for the first quarter, experts said that growth in the first quarter was unsustainable. The statistics office also revealed that growth in the 3 months through June was mostly boosted by net trades as a rise in exports was matched by a slump in imports, as government and private consumption also supported expansion, with construction and equipment investments at new lows.

This GDP data release will flag off a day of key data releases in all Eurozone countries, these releases will be used to generate aggregate GDP figures for the EU that will be released later today. The French economy was reported to have slowed in the second quarter in national data released late last month, while Spain reported a small step down at 0.7% from the previous 0.8% uptick it released in its first quarter.

Analysts now fear a progressive weakening in the previous recovery mounted by the German economy. "The current recovery is clearly running on its very last leg," said ING economist Carsten Brzeski, expressing that the recovery is being artificially sustained by the ECB’s latest monetary policy and the inflow of hundreds of thousands of refugees in the past year, he then added that these two matters are still politically controversial in Germany.

Andreas Rees, an economist at UniCredit SpA in Frankfurt also said that, “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.”

Analysts also believe that over time the impact of the Brexit will find its way into the economic data of Eurozone countries. Johannes Gareis, an economist at Natixis in Frankfurt said, “so far, Brexit has only created headlines with no impact on hard data, but weaker sentiment will slowly feed into the real economy. There will be an effect. It will show over time in the form of lower investment and also lower private consumption.”

The Euro was mildly affected by the report as it traded at 1.1142 in early trading hours shortly after the data release.