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Thursday, 22 August, 2002, 08:35 GMT 09:35 UK
Sign of strength in German economy
Berlin skyline
The economy fell into recession in 2001
Germany's economy, the biggest in Europe, has shown stronger than expected growth in April, May and June.

Healthy spending by consumers helped spur growth of 0.3% during the three months, the Federal Statistics Office said.

The German finance ministry said the figures showed that the country's fragile economy was recovering well.

But analysts warned that 0.3% growth was still feeble, and some continued to be nervous of prospects for the second half of the year.

The German economy - and the high level of unemployment - has been under the spotlight ahead of the general elections on 22 September.

Stable recovery

There have been growing fears that the impact of this month's damaging floods may tip the economy, which suffered recession during the last half of last year, back into a downturn.


The outlook is clouded by mixed signals

Rainer Guntermann, economist

Promised tax-cuts have already been delayed in order to pay for the clean-up operations.

But the country's finance ministry said the flooding would not damage economic expansion, and said it was sticking by a forecast of 0.75% growth for the full year.

"The upward trend remains stable," the ministry said.

"Indeed, indicators point to an acceleration in economic activity in the second half of the year."

But some analysts were not so confident.

"The outlook is clouded by mixed signals," said Rainer Guntermann, an economist at Dresdner Kleinwort Wasserstein, who forecast growth of 0.5% this year.

"Expectations indexes have weakened, and I think growth will be weaker in the third quarter because of the flood.

"We won't see any positive effects from reconstruction until the fourth quarter."

See also:

19 Aug 02 | Business
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25 Jul 02 | Business
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