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German GDP stagnation no reason to get overly concerned - ING

FXStreet (Łódź) - Carsten Brzeski from ING comments on the German GDP data released in the European morning and revealing a decline in Q2 2014, for the first time since 4Q12.

Key quotes

"According to the first estimate of the statistical office, German GDP dropped by 0.2% QoQ, from a slightly downward revised increase of 0.7% QoQ in the first quarter. On the year, the economy still grew by 0.8% (working day corrected 1.2%)."

"Contrary to a common belief, the stagnation is not so much the result of crisis in the Ukraine and European sanctions on Russia but it’s rather homemade. Or better: homemade and Eurozone-made."

"The reversal of the mild-weather-effect on the construction sector, an unusual amount of holidays in May combined with ongoing problems in France and Italy should have been the main drivers of the slowdown of the German economy."

"In the short run, the German economy can remain the Eurozone’s growth engine as the strong labour market and higher wages will support private consumption and strong growth in the US and the UK should more than offset export losses elsewhere."

"Without stronger domestic demand, however, such a growth model could quickly become unsustainable."

"All in all, today’s GDP data do not mark a turnaround in the euro crisis but for Germany they are a strong reminder that too much economic complacency can easily backfire."

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