Eurozone Data Shows German Growth Gain | Business| Economy and finance news from a German perspective | DW | 08.08.2004
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Business

Eurozone Data Shows German Growth Gain

Eurozone indicators to be released in the coming week show the region's economy continuing to grow at a steady pace in the second quarter. Despite recent negative reports, Berlin appears to be improving slightly.

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Strong exports are keeping the German economy running

Following last week's sober reports from the Organization for Economic Cooperation and Development (OECD) which predicted only a cautious growth rate in Germany of 1.1 percent for 2004 and a continuing high unemployment rate into 2005, eurozone economic indicators due to be published this coming Friday could signal a bit of hope on the horizon.

A flash estimate for the region's second quarter gross domestic product is expected to show the economy maintaining the quarter-on-quarter growth rate of 0.6 percent, economists said. Within this context, Germany appears to be one of the driving forces as it experiences a slight pick-up compared to numbers produced for the same time last year.

"The eurozone likely maintained the pace of growth reached in early 2004. A modest weakening in France was probably offset by a more robust gain in Germany," Holger Schmieding of Bank of America told AFP wire services.

Other analysts are predicting eurozone growth could increase to 0.7 percent, which would mark its strongest increase in four years. However, they caution this depends largely on whether domestic demand remains the same or drops, as many say it could.

First estimates of GDP for the major eurozone countries are to be released in the coming days, just ahead of the eurozone figures.

Germany shows signs of turning around

Germany's Bundesbank has already said it estimates German growth picked up a tenth of a percentage point to 0.5 percent in the second quarter. If this is the case, it would represent Germany's best performance in 13 quarters.

As with the OECD report from last Wednesday, followers of the eurozone indicators believe strong exports and industrial activity over the past few months have contributed primarily to the slight increase in German GDP growth. Domestic consumption, however, continues to tug at the recovery rate.

With retail sales falling 0.4 percent quarter-on-quarter, private consumption has done little to boost German growth during the past few months, said Schmieding.

France begins to slow down

While Germany gains slightly in growth, France is expected to show a slower GDP of about 0.6 percent, down from the exceptionally strong first quarter figure of 0.8 percent. Nonetheless, it is still the fastest growing major eurozone economy.

Compared to Germany, France is benefiting from more resilient consumer spending, with household consumption of manufactured goods surging 1.8 percent in the second quarter.

The eurozone indicators are likely to be received less positively in Italy, which is expected to post the weakest growth rate among the major eurozone economies, maintaining the 0.4 percent growth rate achieved in the beginning of the year.

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