FRANKFURT—Germany has maintained a solid economic performance, despite a mild slowdown in Q2. According to the Federal Statistical Office, GDP grew 0.6% in the three months through June, totaling 2.5% year-to-date. Economic forecasts predict growth to continue at 2.8% annually.
In comparison to the U.S., Germany’s economy fell short 0.1%, which expanded at an annualized pace of 2.6% in the same period. However, Germany outpaced the Eurozone aggregate, which stands at 2.3%. As a result, analysts raised their growth forecast for the German economy to 2% from an earlier estimate of 1.6%.
With the German general election on the horizon, a robust economy is likely to favor the chances of Chancellor Angela Merkel. The incumbent has maintained a comfortable polling lead before the coming election day, set to take place on September 24th, 2017. In addition, strong economic forecasts are likely to solidify expectations that the European Central Bank will begin to phase out stimulus measures in 2018.
Signals of strength in the second quarter came from domestic demand, as consumer and government spending increased. Furthermore, corporate investment in machinery and plant equipment also increased from Q1. On the other hand, foreign trade softened Germany’s performance, with imports exceeding exports.
A rising euro reduces the competitiveness of the international market and poses a risk to future exports. Nevertheless, the German economy is still thriving and is currently set to maintain a solid performance in the next few quarters.