Weak investment dampens German economic growth in Q2

The German economy grew by 0.4 percent in the second quarter of 2016, slower than in the previous three months, mainly due to a lack of investment, official data showed on Wednesday.

In the first quarter, Europe's biggest economy expanded by 0.7 percent. According to German federal statistics office Destatis, the slowdown was mainly due to weak investment in the period between April and June.

Investment in machinery and equipment decreased by 2.4 percent quarterly, investment in construction fell by 1.6 percent.

"Positive contributions mainly came from the balance of exports and imports," Destatis said, adding that exports rose by 0.6 percent, while imports declined by 0.1 percent.

Private consumption and government expenditure also supported the economic growth. Compared with the first three months, private consumption rose by 0.2 percent in the second quarter and government expenditure increased by 0.6 percent.

"Looking ahead, private consumption should remain an important growth driver on the back of low inflation, low interest rates, low unemployment and higher wages," said Carsten Brzeski, chief economist at ING DiBa bank, "In addition, at least in the short run, the refugee crisis will continue to support domestic demand."

"The economy's Achilles' heel, however, remains the lack of new investment," he added, "To kick-start investment in an ageing economy, some government support is needed. Not only at the national level but also at the European level." Endit