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German central bank: strong domestic growth in Q2

July 22, 2013

BERLIN (AP) — Germany’s central bank says recent data indicate the country’s economy, Europe’s biggest, “expanded strongly” in the second quarter following a weak start to the year.

The Bundesbank said in its monthly report Monday that it believes industry and construction made significant contributions to growth in the April-June period. The economy grew by 0.1 percent in the first quarter, weighed down by a long winter that hit sectors such as construction and the financial crisis among the 17 European Union countries that use the euro.

The Bundesbank didn’t give a specific prediction for second-quarter growth.

German economic activity could help push the eurozone out of a recession that has lasted since the final quarter of 2011. The eurozone economy shrank 0.2 percent in the first quarter.

For Germany, economist Holger Schmieding at Berenberg Bank predicts growth of 0.8 percent from the previous quarter, saying the country is benefiting from the easing in the eurozone crisis.

The region’s financial turmoil has subsided since the European Central Bank in September 2012 offered to buy the government bonds of indebted countries such as Spain and Italy. That lowered their borrowing costs and defused fears of a disastrous government default.

Schmieding said Germany was tied to the eurozone’s fate since it makes big-ticket items such as industrial machinery and autos that it exports to fellow European countries.

“Whether or not companies and households at home or abroad buy these big-ticket items reflects their level of confidence in the future,” he wrote in a research note. “That helps to explain why the German business cycle is driven so much by the escalation or the easing of tensions in the eurozone, despite Germany’s underlying fundamental strength.”

Official data for the second quarter are due on Aug. 14.

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