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Poor German IP data bad news for Q2 GDP - ING

FXStreet (Łódź) - Carsten Brzeski from ING comments on the weak German Industrial Production numbers for June, which in his opinion point to a stagnation of the country's economy in the second quarter of the year.

Key quotes

"According to the statistical office, German industrial production increased by 0.3% MoM in June, from a revised -1.7% MoM in May. On the year, industrial production is down by 0.5%."

"These data provide more, if not even overwhelming, evidence that the second quarter saw a stagnation of the economy if not even the first contraction since the end of 2012."

"Contrary to often voiced views that the German economy has suffered severely from the ongoing geopolitical tensions, the probable stagnation was rather home-made. Particularly, the construction sector has become a drag on growth."

"Looking ahead, the construction sector and private consumption, on the back of low interest rates, the strong labour market and higher wages, should return as important growth drivers in the second half of the year."

"However, the emergence of new uncertainties, ie geopolitical tensions but also the bumpy recovery of the rest of the Eurozone, could clearly hurt exports and postpone the long-needed return of domestic investment in Germany once again."

"The domestic fundamentals of the German economy remain sound and with the expected growth acceleration in the US and the UK at least some major trade partners could keep the German export engine running."

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