Monday, August 19 15:33:43
German economic growth should steady after a strong second quarter, the Bundesbank said today, adding that the European Central Bank's forward guidance on low interest rates was "not an unconditional commitment".
The performance of Germany - the euro zone's biggest economy - is crucial to the bloc's fortunes, and stronger-than-expected German and French growth helped pull the currency area out of recession in the second quarter.
In its August monthly report, the Bundesbank said the expansion in the second quarter - when Germany grew at the fastest pace in over a year - was likely to have returned the economy to "a normal level of capacity utilisation".
"In the second half of 2013, economic growth in Germany is likely to return to normal and steady rates," it added. "The expected increase, more or less equalling that of potential growth, will ensure that capacity utilisation remains good."
In June, the Bundesbank said German potential production growth was around 1.3 percent.
The 0.7-percent expansion on the quarter in the April-June period was partly due to weather-related catch-up effects after an unusually long and cold winter. Reuters data shows median German quarterly growth since 2000 has been around 0.34 percent.
"We saw a better dynamic in the second quarter and we expect that to continue in the third and fourth quarters," Economy Minister Philipp Roesler told Reuters in an interview ahead of next month's federal election in Germany.
He said small- and mid-sized firms would gain confidence from the stabilisation of the euro zone, adding: "This leads to more investment by these companies in Germany, a rise in domestic demand and better growth numbers."
Germany's traditionally export-driven economy is relying on domestic demand to prop up growth as foreign trade looks likely to act as a drag this year, given that much of the euro zone, to which it sends 40 percent of its exports, is still struggling.
The euro zone's poorer south is struggling to climb out of a debt crisis with fiscal austerity and structural reforms that have yet to reduce painfully high unemployment rates. (Reuters)