German Economy Shrinks Unexpectedly
(RTTNews) - Germany's economy contracted unexpectedly in the second quarter largely due to weak investment, while France and Spain fared better than expected and Italy kept growing. Gross domestic product shrank 0.1 percent on a quarterly basis in the second quarter, reversing the first quarter's 0.2 percent expansion, preliminary data from Destatis showed on Tuesday.
The largest euro area economy was expected to log a marginal 0.1 percent growth. On a yearly basis, GDP shrank by calendar-adjusted 0.1 percent, the same pace of fall as reported in the first quarter. At the same time, price-adjusted GDP posted a 0.3 percent rise, following first quarter's 0.8 percent contraction.
Details of the second quarter GDP will be released on August 27.
The disappointing data illustrates how difficult it will be to escape the current dismal combination of both cyclical and structural headwinds, ING economist Carsten Brzeski said.
"Nevertheless, a rebound in the second half of the year is still possible, even though it is highly unlikely that it will be a strong one," the economist added.
Earlier this month, the International Monetary Fund projected the German economy to grow 0.2 percent this year and 1.3 percent in 2025.
France's economy posted a faster-than-expected growth of 0.3 percent in the second quarter on investment and exports. Spain posted a strong 0.8 percent expansion, while growth in Italy softened to 0.2 percent from 0.3 percent.
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