Germany: Strong, but slowing - HSBC

Stefan Schilbe Economist at HSBC, notes that after an upwardly revised Q1 (+0.7% q-o-q), the healthy expansion of the Germany economy continued in Q2 on the back of rapid domestic demand growth.

Key Quotes

“GDP grew by 0.6%, the twelfth consecutive quarterly rise. Business investment, which was held back by political risks in 2016, firmed by 1.2% q-o-q, after an already strong Q1 (+2.1% q-o-q). Generally, this trend is likely to continue, as capacity utilisation has increased to 86.7% – the highest level since Q2 2008. While orders for domestic capital goods have only risen gradually, corporate investment intentions have continued to accelerate of late.”

“Moreover, the recent appreciation of the trade-weighted euro is unlikely to dent the export recovery as long as the tailwind from the global trade cycle persists. Construction surprised to the upside, partly due to spill-over effects from major statistical changes undertaken in February, but should see a reversal in Q3. Building permits for dwellings, which tend to lead residential construction by about nine months, also signal a moderation as they have plunged in y-o-y terms.”