On higher household consumption, German GDP growth seen at 0.2 pct in Q2

The preliminary estimate of Germany’s second quarter economic growth is expected to be 0.2 percent quarter-on-quarter, said Societe Generale in a research report. Even if survey data imply higher growth of between 0.4 percent and 0.6 percent, hard data for industrial production and retail sales have been weak. This implies growth much closer to zero for the second quarter, stated Societe Generale.

However, PMI data and the Ifo survey for June indicated a considerable rise, implying that the correction in April and May from the robust first quarter data might have been waning. The Brexit effect is expected to be a drag on confidence again in July, even with weaker developments in industrial production and retail sales in the third quarter. However, higher contributions to the real GDP growth are expected to be seen that implies that the real Brexit effect might take longer to materialize in the German data, according to Societe Generale.

Household consumption is expected to have been the main contributor to the GPD growth in the second quarter, along with government consumption. Meanwhile, equipment and construction investment are expected to fall after the unexpected solid investment data in the first quarter.

On the other hand, exports in the second quarter are likely to have recorded a relatively good reading after rising 1 percent on sequential basis in the first quarter. Net exports are expected to have contributed about 0.3 percentage points to the quarterly growth.

“Crucially, we expect some continued resilience in the German data based on strong domestic drivers for growth and a stellar labour market, leaving annual growth this year at around 1.6%,” added Societe Generale.