October 12, 2016 / 8:09 AM / a year ago

German growth to slow in second half after strong first half expansion - Economy Ministry

BERLIN (Reuters) - The German economy will lose some steam in the second half of the year after its robust performance in the first half, the Economy Ministry said on Wednesday, putting a damper on growth hopes after better-than-expected economic data.

“The economic upswing of the German economy is solid. But growth is likely to slow a bit in the second half of the year after the strong expansion in the first half,” it said in its monthly report.

A number of external risks is clouding Germany’s foreign trade outlook, including the uncertainty about the outcome of Brexit negotiations between Britain and the remaining 27 European Union members on their future relationship, it said.

But domestic demand is expected to propel growth in Europe’s biggest economy. “Private consumption remains an important pillar of support,” the ministry said, adding that rising employment, higher real wages and weak inflation were boosting the purchasing power of consumers.

Construction is expected to rebound in the coming months after its relatively weak output in August, giving the economy an additional push in the second half of the year, it said.

The government last week lifted its 2016 growth forecast to 1.8 percent from 1.7 percent previously, which would be the strongest expansion rate in half a decade. Leading economic institutes are even predicting a growth rate of 1.9 percent.

For 2017, the government expects a slowdown in growth to 1.4 percent due to sluggish foreign demand. Adjusted for the number of work days, the economic cooling is expected to be less severe with a predicted growth rate of 1.6 percent in 2017.

Reporting by Michael Nienaber; Editing by Joseph Nasr

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