German Economy Mininster hints at end to recession

BERLIN (Reuters) - Germany's Economy Ministry on Friday signalled there was a good chance the country had come out of its severest recession since World War II in the second quarter, saying overall activity had stabilised.

Following a raft of upbeat data, a senior government official last week told Reuters German gross domestic product was broadly flat in the second quarter, and may even have expanded slightly.

The ministry's monthly report for July said Europe's largest economy looked to have bounced back from a 3.8 percent contraction in the first quarter, the sharpest since Germany reunified in 1990.

"There is much to suggest that overall economic activity may have stabilised in the second quarter of this year," the ministry said in the report.

Overall, the government expects the economy to contract by a record six percent this year. But the ministry said the outlook for industrial output and exports had improved.

"Domestically, the drivers stemming from the economic stimulus packages are starting to have an impact. Private consumption, which is profiting from this, should continue to provide support," the ministry said.

Tame price developments and the fact that Germany's labour market had held up relatively well in the crisis was helping to encourage shoppers to part with their cash, it added.

"However, the labour market is likely to face a tougher time over the coming months," the ministry said.

(Reporting by Dave Graham; editing by Patrick Graham)