German economy contracts unexpectedly in second quarter

Germany's economy unexpectedly shrank in the second quarter, according to data released on Tuesday.

The country's gross domestic product (GDP) fell by 0.1% compared to the first quarter, the federal statistics office Destatis said.

Analysts surveyed by FactSet had previously forecast 0.1% growth for the same period.

"Germany’s economic growth in the second quarter was as underwhelming as the country’s modest medal tally at the Paris Olympics so far," said ING analyst Carsten Brzeski.

Recovery prospects dampened

The news comes after modest growth in the first quarter had raised prospects of a recovery in Europe's largest economy.

Statisticians pointed to weak investment as the reason for the second quarter contraction.

Germany's economic slump also stands in contrast to modest growth of 0.3% across the eurozone, according to figures released by the EU statistics agency Eurostat on Tuesday.

"Germany is performing very poorly at the moment, especially in comparison with neighboring European countries where we have seen quite robust growth figures," said LBBW economist Jens-Oliver Niklasch.

"Of course, Germany's export-orientated industry is more exposed to the weakness of the Chinese economy, for example, but many of the problems are homemade," he added.

German economy 'between hope and despair'

Brzeski said that Tuesday's figures "confirm that Germany is the growth laggard of the eurozone."

"Looking ahead, the German economy will continue to hover between hope and despair," he said.

"With both the US and the Chinese economies losing momentum, along with new trade tensions, there is very little hope for a strong export-driven recovery."

Although the German Council of Economic Experts has forecast growth of around 0.2% for the year overall, the economy nevertheless faces a number of other headwinds like a shortage of skilled labor, high energy prices, and an automotive industry that is racing to adapt to electric mobility.

"The triple decline in the ifo business climate and the weakness of other economic indicators suggest anemic growth at best for the second half of the year," said Commerzbank chief economist Jörg Krämer.

zc/rc (dpa, AFP)