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German Economic Growth Softens in Q2

German Economic Growth Softens in Q2

Benjamin Spier, Technical Strategist

THE TAKEAWAY: German GDP rises 0.3% in 2Q, beats expectations -> Growth attributed to exports and domestic consumption -> Euro rising in today’s session

German economic growth slowed in the second quarter according to the gross domestic product numbers reported by the Federal Statistical Office. However, the 0.3% (seasonally adjusted) quarterly growth beat expectations for a 0.2% increase in GDP, but was lower than the 0.5% growth in Q1. Annually, the GDP grew at the slowest rate in 10 quarters; the economy expanded 0.5% when compared to 2Q of 2011, lower than the expected 0.9% annual growth.

According to the release, a rise in exports and domestic consumption contributed to GDP growth. The low annual growth is partially due to the fact that 2Q in 2012 had one less working day than 2Q of 2011. The number of people employed during the quarter rose 1.3% from a year earlier.

The Eurozone debt crisis has weighed on German economic growth as exports to other members of the currency bloc dried up while fiscal policy focused on debt reduction and regional stability. To help solve the crisis, the ECB has mentioned a possible plan to purchase struggling nations’ sovereign debt, however the Bundesbank has so far objected to this plan.

The Euro was not significantly affected by the German GDP release. Despite a longer term down trend, the Euro continued a 3-week uptrend against the US Dollar in today’s session, climbing above 1.2350. There could be possible resistance at 1.2435, by the 61.8% retracement of July’s declines.

German_Economic_Growth_Softens_in_Q2_body_eurusd_daily_chart.png, German Economic Growth Softens in Q2

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