German economy firing on all cylinders in the second quarter

Germany's economy continued expanding at a steady clip in the second quarter of the year, thanks to robust household consumption and government spending.

The gross domestic product of the euro area's largest economy grew by 0.6% quarter-on-quarter over the three months to June, according to the Ministry of Finance, confirming an earlier estimate.

In comparison to the year earlier period, the rate of growth in GDP picked up from a 2.0% clip to 2.1%.

Household consumption rose by 0.8% on the quarter and government expenditures by 0.6%. Yet that was partially offset by a 0.3 percentage point drag from net trade as imports jumped by 1.7%, easily outpacing a 0.7% rise in exports.

Gross fixed capital formation was also strong, growing by 1.0% even after a 2.7% surge over the first three months of the year.

"Leading indicators suggest that domestic demand will continue perform strongly in the second half of the year, but we think the quarter-on-quarter run-rate in headline GDP growth will slow to 0.4%-to-0.5% quarter-on-quarter.

"Full year growth of above 2.0%, however, is a very good bet. The chart shows the sectors’ contributions to the quarter-on-quarter rate in percentage points. Consumers’ spending was the main driver of growth in Q2, but investment also did its bit, especially if we include the contribution from inventories," Claus Vistesen at Pantheon Macroeconomics said following the release of the data.