Germany's export-fuelled recovery is in danger of receding in coming months as domestic spending remains too weak to compensate for a likely slowdown in the global economy, economists said today.
They were responding to Federal Statistics Office figures that confirmed GDP growth of 0.5 per cent in the second quarter relied almost entirely on exports as private and public spending stagnated and capital investment declined.
The Office also said Germany's budget deficit again broke European Union limits in the first half of the year reaching 4 per cent, although it said the data could not be used to make a full year projection.
Mr Joerg Kraemer, chief strategist at Invesco Asset Management in Frankfurt, said slowing expansion in the United States and China and soaring oil costs suggested the peak in the global upswing had already passed and German growth was likely to slow.
"The problem is that German domestic demand is too weak to compensate for any deceleration in global growth," Kraemer said.
"The second quarter was probably the peak in the German business cycle," he said, adding that he expected annual GDP growth in Europe's biggest economy of 1 per cent in 2005, down from about 1.7 per cent this year.
A breakdown of the second-quarter GDP data showed foreign trade contributed half a percentage point to quarterly growth as exports increased 3.2 per cent, outpacing a 2.2 per cent gain in imports.
Government spending added a tenth of a point to growth, while shrinking investment by firms, mainly in the construction sector, shaved off two tenths of a point.
AFP