German economy slowing down slightly in second quarter

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According to the monthly Bundesbank (German Central Bank) report, the economy has slightly decelerated in the second quarter of 2017. “The German economy will continue to grow in the coming months, albeit somewhat less rapidly than in the previous quarter,” central bank economists comment in their latest report, much in line with previous estimations of the Federal Ministry for Economic Affairs and Energy.

In the first six months of the year, GDP increased by 1.2 percent compared to the previous year, whereas growth was at 0.8 percent in the second half of 2016. The buzzing economy allowed for a record budget surplus – a scenario likely to repeat itself in 2017. First estimations for the total growth figure of 2017 predict an increase of two percent, slightly surpassing the 1.9 percent of 2016.

According to the Bundesbank, manufacturing will continue to drive growth, despite the fact that the second quarter started somewhat sluggishly. All in all however, the verdict is very positive: manufacturing and construction companies report full order books, consumer spending is at a solid level, and unemployment rates continue to decrease.

Nonetheless, the next German government will hardly be in a position to sit back and relax. After all, the golden years of growth and prosperity might end sooner than some might have hoped. The erratic and unpredicatable politics of US president Donald Trump, whether on trade policy or international security, pose a genuine threat to both global peace and economic stability.

The German Institute for Economic Research (DIW) describes the current situation as a partially “borrowed boom”, arguing that low interest rates and a healthy labour market have mostly powered the upturn. Another risk is posed by the looming departure of the United Kingdom from the European Union, which is due to take place in 2019. If the negotiations yield no amicable solution for post-Brexit trade relations, German exporters might face significant trade tariffs and other additional costs.

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