German Economy Driven by Corporate Investment, Consumption in 2Q -- Update

Rising corporate investment and private consumption drove Germany's economy in the second quarter, official data showed Friday, a development that is likely to play into the hands of Chancellor Angela Merkel ahead of elections this fall.

The Federal Statistical Office said the economy grew at a quarterly clip of 0.6%, or 2.5% in annualized terms, and hence confirmed a preliminary growth estimate from Aug. 15.

But fresh details on its composition showed that Europe's largest economy was propelled by domestic demand, whereas net exports weighed on Germany's growth rate.

Illustrating the trend, investments in plant and machinery--the Achilles' heel of the economy--rose 1.2% from the first quarter. Construction investment increased 0.9%, reflecting the building boom in many German cities.

Record-low unemployment, meanwhile, continued to bolster consumer sentiment, as household consumption rose 0.8% from the first quarter.

The data add to evidence that the eurozone's recovery is broadening. Against this backdrop, the European Central Bank is widely expected to gradually phase out its stimulus measures from early next year.

Robust economic activity also helped fill government coffers. The Federal Statistical Office said that the national budget surplus, which comprises the central government, the states, local administration and social security funds, amounted to 18.3 billion euros ($21.6 billion) in the first six months of the year, which marks an increase of 4.5% from the same period in 2016.

Write to Nina Adam at nina.adam@wsj.com @wsj.com>

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August 25, 2017 03:44 ET (07:44 GMT)