German Bundesbank sees higher growth, lower investment | Business| Economy and finance news from a German perspective | DW | 19.08.2013
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German Bundesbank sees higher growth, lower investment

Germany’s central bank has predicted the recovery in Europe’s biggest economy to continue for the rest of the year. The upswing, however, is driven by consumer and state spending rather than corporate investment.

In the second half of 2013, economic expansion was likely to grow at normal and steady rates, Germany's Bundesbank said in its August report released Monday.

Although it gave no exact growth prediction, the central bank saw gross domestic product (GDP) expanding by more or less the same rate as in the second quarter of the year, in which German economic output picked up by 0.7 percent. That followed stagnation in the first quarter.

Monday's Bundesbank data suggested that growth was driven primarily by domestic demand, with consumer spending and public expenditure both rising. Capital investment was also growing, the bank said, but added that a noticeable revival in investment was doubtful.

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Investment in machinery and equipment, which had stabilized at a low level at the beginning of 2013 gathered little momentum in the European spring despite sharp increases in economic output, the bank wrote in its monthly report.

“This was probably mainly due to the long-standing gloomy sales outlook, above all in the euro area, and the ongoing uncertainty about the economic policy situation in view of the debt crisis,” it added.

The German central bank also urged the government to continue along the path of budget consolidation, and refrain from spending extra income garnered from growth.

The Bundesbank called for restraint without costly pledges to voters ahead of September's general election in Germany.

uhe/ipj (Reuters, AFP, dpa)

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