13 August 2010
Last updated at 06:52 ET

German economy sees 'record' growth of 2.2%

Strong exports helped to boost German growth The German economy grew by 2.2% in the three months to the end of June, its fastest quarterly growth in more than 20 years, official figures show.

"Such quarter-on-quarter growth has never been recorded before in reunified Germany," the national statistics office, Destatis, said.

The main reason for the higher-than-expected growth was strong exports, helped by a weaker euro.

The eurozone economy grew by 1% during the quarter.

This compares with growth of 0.2% in the first three months of the year, the area's official statistics agency, Eurostat, said.

Not since the Berlin Wall divided the country has Germany seen growth of 2.2% in a single three-month period.

The German statistics agency says the numbers can partly be explained by a sustained period of export growth, as Germany's immense manufacturing sector begins to recover the markets it lost in 2009.

But the most surprising element of the numbers is an apparent contribution from the German consumer. They have traditionally been very cautious in their spending habits, but appear in 2010 to have finally opened their wallets with gusto.

France's figure of 0.6% growth in the period from April to June is also significantly better than economists had expected, raising hopes that Europe may be emerging from the gloom of the last three months, a period when many contemplated the end of the euro currency as rioters took to the streets of Athens.

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The French economy grew by 0.6% in the second quarter, also up from 0.2%, while the Spanish economy grew by 0.2%, compared with 0.1% in the previous three months.

The pace of growth in the Italian economy remained the same, at 0.4%.

Greece, however, saw its economy shrink by 1.5% during the quarter. The country's government has instigated a series of far-reaching austerity measures recently, designed to reduce its high budget deficit.

All the second quarter figures are initial estimates and could be revised up or down in the coming months.

The eurozone quarterly GDP figures show that the economic recovery in Europe gained pace between April and June. The UK has also reported higher-than-expected growth of 1.1% for the period.

In the US, however, second quarter growth was 0.6%, down from 0.9% between January and March, raising questions about the strength of the recovery in the world's biggest economy.

"Second quarter GDP data for the eurozone's major economies suggest that the region performed very well, both by its own and international standards," said Jennifer McKeown at Capital Economics.

"This would be the strongest in three-and-a-half years and mean that, unusually, growth in the eurozone outpaced that in the US."

However, along with other analysts, she highlighted concerns about the strength of the recovery in "peripheral economies", such as Greece and Spain.

Destatis also revised up the German growth figure for the first three months of the year, to 0.5% from 0.2%.

As well as the "strong contribution" from exports, the office said household and government spending also helped to boost growth in the second quarter.


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