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German Exports, Investment Underpinned Third-Quarter Growth Amid Slowdown

Wednesday, Nov 24, 2010

Exports and investment drove Germany’s economic growth in the third quarter, a detailed breakdown of the data showed today.

Exports rose 2.3 percent from the second quarter and equipment investment increased 3.7 percent, the Federal Statistics Office in Wiesbaden said today. Gross domestic product gained 0.7 percent when adjusted for seasonal swings, the office said, confirming a Nov. 12 estimate. In the second quarter, GDP surged 2.3 percent.

While growth is slowing as export demand wanes, stronger domestic spending may put the expansion on a firmer footing. Germany’s economy, Europe’s largest, will expand 3.7 percent this year, according to the government’s council of economic advisors. That would be the fastest growth since 1991.

“The upswing is broadening,” said Andreas Rees, chief German economist at UniCredit MIB in Munich. “Economic growth is not only driven by exports and investment, but also by private consumption.”

Consumer spending rose 0.4 percent in the third quarter, today’s report showed. Construction spending fell 0.4 percent after its 6.9 percent surge in the second quarter. Government spending advanced 1.1 percent and imports rose 1.9 percent.

Net trade and private consumption both contributed 0.3 percentage point to GDP growth in the quarter, while equipment investment added 0.2 percentage point. Inventory changes dragged on growth.

Germany is driving economic expansion in the 16-nation euro area as the sovereign debt crisis that started in Greece spreads to other countries. Ireland this week became the second euro nation to ask the European Union for a bailout.

Euro-area economic growth slowed to 0.4 percent in the third quarter from 1 percent in the second as governments’ cut spending to rein in record budget deficits. Weaker global and euro-area demand for its goods may damp German growth.

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