German economy goes into reverse

GDP fell 0.1 per cent quarter-on-quarter after a confirmed growth rate of 0.4 per cent in the first three months of the year

trong exports, state spending and consumers helped the German economy avoid a recession in the third quarter. Reuters

The German economy shrank in the second quarter, dragged down by a slump in exports, data showed on Wednesday, as manufacturers in Europe's largest economy struggle against weaker foreign demand and trade disputes.

Gross domestic product fell 0.1 per cent quarter-on-quarter after a confirmed growth rate of 0.4 per cent in the first three months of the year, the Federal Statistics Office said.

The preliminary reading for April to June was in line with a Reuters poll of analysts.

The annual growth rate slowed to 0.4 per cent in the second quarter from 0.7 per cent in the first, calendar-adjusted data showed. That beat the poll forecast of plus 0.1 per cent.

"The development of foreign trade slowed down economic growth because exports recorded a stronger quarter-on-quarter decrease than imports," the statistics office said.

Positive contributions came from domestic demand as household consumption, government expenditure and gross fixed capital formation increased on the quarter, the office said.

Construction declined in the second quarter after the sector pushed up overall growth in the first three months due to an unusually mild winter, the data showed.

"For a year now, the German economy has been only crawling forward," Unicredit analyst Andreas Rees said, adding there was hardly any improvement in sight for the second half of 2019 as there were many uncertainties for German exporters.

"Besides Brexit, this is above all the US-Sino trade dispute and possible US tariffs on European cars," Mr Rees said.

Following release of the data, the yield on Germany's benchmark 10-year government bond dropped to a record low of minus 0.6 per cent.