By Hans Bentzien
FRANKFURT--German gross domestic product stalled in the second quarter as geopolitical concerns weighed on industrial output and construction weakened after a weather-induced boom in the first three months of the year, the Bundesbank said Monday.
The warning, contained in the central bank's monthly bulletin, is an indication that the euro zone will struggle to improve on the first quarter's meager growth rate.
Germany accounts for about 30% of the bloc's GDP. During the first quarter, euro zone GDP expanded just 0.8% at an annualized rate, or 0.2% on a quarterly basis, despite annualized growth of 3.3% in Germany. Excluding Europe's largest economy, the euro zone economy will have contracted slightly in the first quarter.
"Considering that the service sector is likely continued to expand, the real, adjusted gross domestic product (in Germany) was likely unchanged from the first quarter," the Bundesbank said. "Geopolitical tensions are reflected not only in weaker future indicator surveys, but also in ebbing demand for interim goods."
The German statistics agency is expected to release preliminary second quarter GDP data on Aug. 14. The Bundesbank report didn't provide an estimate for growth in the second half of the year.
Based on April and May figures, factory production and construction have each fallen compared with the first quarter. Yet there are some caveats that may have exaggerated this weakness. Some of the weather-induced construction gains in the winter were likely borrowed from activity that would have occurred in the spring. In addition, many German workers took bridge vacations after mid-week holidays during the second quarter, resulting in fewer days worked, the Bundesbank said.
To date, the Bundesbank has forecast German economic growth of 1.9% this year, up from a projection of 1.7% in December. In March, the Bundesbank said second-quarter growth this year would be considerably below that of the first quarter.
Other large euro members such as France and Italy appear unlikely to have picked up the slack from weaker GDP in Germany during the second quarter.
French industrial production fell in April and May on a monthly basis, while it fell sharply in Italy, by 1.2% on the month, in May.
--Brian Blackstone contributed to this article.
Write to Hans Bentzien at email@example.com
(END) Dow Jones Newswires
July 21, 2014 06:14 ET (10:14 GMT)
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