highest since WW2
Eurozone growth surpasses US on strong German gains
Euro zone beats U.S. in economic growth
Germany posts record Q2 growth as exports boom
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Topics »united states|growth|germany|gdp|economyGermany's economy grew at the fastest rate since reunification in the second quarter as companies stepped up investment and exports surged, providing fresh evidence that the recovery has shifted up a gear.
Gross domestic product (GDP) grew 2.2 per cent on the quarter, beating all projections in a Reuters poll of 34 economists who gave a consensus forecast for 1.3 per cent growth.
First-quarter growth was also revised up to 0.5 per cent from 0.2 per cent previously, Federal Statistics figures on Friday showed.
Economy Minister Rainer Bruederle said growth of well over two per cent was now possible for the full year -- far above the government's official forecast of 1.4 per cent.
"We can't speak of a growth miracle but we are certainly in an XL-upswing," Bruederle said.
Several economists said they expected the economy -- Europe's largest -- could grow by at least 3 per cent.
"I can see 3 per cent growth this year, even a bit more than 3 per cent," said Andreas Scheuerle at DekaBank. "The German economy is booming thanks to global demand."
The super-strong reading suggests quarterly growth for the 16-nation euro zone will prove to be stronger than the 0.7 per cent forecast when figures are released at 0900 GMT, even though Germany is far outpacing all its peers in the bloc.
The German economy last grew by more than 3 per cent in a full year in 2006, when it expanded by 3.4 per cent.
The euro gained ground after the data and European stock markets rose on opening .FTEU3.
Bruederle said the German GDP numbers showed the government should continue its 80-billion euros austerity drive to rein in a bloating budget deficit, although higher growth will boost the government's coffers dramatically.
EURO BOOSTS EXPORTS
Germany has its exports to thank for recovering from its deepest post-war recession, especially as the weaker euro -- down over 10 per cent against the dollar since the start of the year -- makes its products cheaper outside the currency bloc.
Analysts remain cautious about the pace of growth going forward as budget cuts kick in across Europe, dampening demand for German products, while the US economy also appears to be struggling.
"Looking ahead, it is almost needless to say that the current growth momentum is hardly sustainable in the coming months," said Carsten Brzeski, economist at ING Financial Markets.
"With the one-off impact from the construction sector and normalizing of export growth, German growth will return to more ordinary growth numbers," he said.
But even moderate growth in the third and fourth quarters could result in a GDP rise of above three per cent for the whole year.
German companies are certainly benefiting from the upswing.
Steelmaker ThyssenKrupp (TKAG.DE) raised its outlook for this year after its third-quarter earnings beat estimates on the back of robust demand from the automotive and engineering sectors.
Out of 30 DAX companies, 23 reported better-than-expected second-quarter results and 12 hiked their outlooks in the recent reporting season.
While led by exports, the upswing is beginning to broaden, with consumer data turning upwards as well.
Year-on-year, the economy grew by 4.1 per cent in the second quarter, the GDP data showed. This followed a revised 2.1 per cent expansion in the January-March period and beat expectations for 2.4 per cent growth year on year.
Germany is delighting in its old-fashioned boomA supposedly outdated economy is in rude health and swelling national pride. But it may not be a straightforward fairytale
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Benjamin Dierks guardian.co.uk, Friday 13 August 2010 18.04 BST Article historyDuring the second quarter of this year, the German economy grew at its fastest pace since reunification in 1990. It showed the strongest growth in the eurozone in more than two years. And it grew well above market expectations. Reports are full of superlatives. "Madness", said Alexander Koch of Unicredit. Rainer Brüderle, Germany's Liberal Democratic minister of economic affairs, said that he would stop short of speaking about a miracle but that Germany certainly witnessed an "XL upswing". Finally, Jörg Krämer, the chief economist of the Commerzbank said that this brings one word to his mind: sommermärchen (summer fairy).
The term sommermäcrchen stirs a memory in Germany. The German press dubbed the unexpected success of the national team during the 2006 football world cup a sommermärchen. It charmed the tournament's host country just as the current upsurge electrifies economists and analysts. The players back then weren't the youngsters of current German coach Joachim Löw, who this year surprised spectators and commentators with their modern European team football. Jürgen Klinsmann's selection of 2006 was dominated by today's veterans such as Michael Ballack and Torsten Frings. German football was still solid wertarbeit.
So in a way, the term sommermärchen implies more than just an unexpected success. It expresses the joy of a country that it can still cash in on its traditional values: exports, state and consumer consumption, investments and the German construction sector growing strong again and working off the winter's backlog are expected to have been the main factors behind Germany's almost miraculous second quarter growth.
German companies have arguably benefited from concern about debt problems in Greece and Spain. It has pushed down the value of the euro against the dollar and made German products cheaper abroad. But the success of the German economy also comes at a time when it has long been deemed outdated. It was said to be too export-oriented, relying on its industry way too much and not doing enough to push the service sector. German politicians were reportedly annoyed in the 1990s when Gordon Brown stressed the advantages of the post-industrial service society whenever he could.
In Britain, more than three-quarters of the labour force are employed in the service sector. Industry accounts for only 12.4% of the GDP of Europe's former cradle of industrialisation compared with close to 22% in Germany. The recession and the financial crisis have painfully revealed that the British economy model, which centres on the financial service sector, bears tremendous risk. Despite the power of leading companies such as BP or BAE Systems, the British economy could disappear from the group of the world's 10 leading industries as soon as 2015, analysts say. Today, by the way, British politicians are being less missionary on the European stage.
And yet, is Germany going through an old industry's fairytale? Probably not.
Germany got off relatively lightly, more sober economists say. Exporters were caught like a deer in headlights by the financial crisis. But Germany didn't suffer from internal problems as much as countries such as Spain or the US. It didn't experience economic overheating, competitive disadvantage or a housing bubble. Therefore stimulus packages such as the car scrappage scheme could help to bridge the time of shock. This might also be a reason why employers reduced hours instead of letting people go.
So far, the boom seems way too fragile to be sure that it doesn't tip if it faces the next hurdle. As chief economist Thomas Fricke of the Financial Times Deutschland says, we better have another stimulus package ready – for the next time a bridge is needed.
German Economic Boom Creates Job Machine
Experts in the government and academia are astonished over the strength of Germany's economic recovery. Unemployment is declining more rapidly and the government coffers are filling more quickly than during any other economic recovery in postwar German history. What's causing the powerful economic upswing?
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