German economy grows at better than expected rate

Strong foreign trade and buoyant consumption drove Germany's economy, Europe's largest, to better-than-expected growth in the second quarter, federal statistics office Destatis said on Wednesday.

Gross domestic product (GDP) grew by 0.4 percent between April and June, adjusted for seasonal, calendar and price effects -- twice as fast as analysts surveyed by Factset predicted. 

However, the final figure, which confirmed a preliminary Destatis reading earlier in August, represented a slow-down from the unexpectedly strong 0.7-percent expansion in the first quarter.

"Compared with the previous quarter, the positive impulses above all came from foreign trade," Destatis said in a statement.

According to preliminary estimates, exports of goods and services increased by 1.2 percent between April and June, while imports fell by 0.1 percent.

Overall, the data showed "mixed signals" in the German economy.

Households increased spending by 0.2 percent and the state by 0.6 percent compared with the previous quarter.

But business investment in capital goods fell by 2.4 percent and in construction by 1.6 percent.

Looking back at the previous year, the economy was 1.8 percent larger between April and June than the same period in 2015, adjusting for price and calendar effects -- a slightly slower growth rate than the first quarter's 1.9 percent.

In the coming quarters, "private consumption should remain an important growth driver on the back of low inflation, low interest rates, low unemployment and higher wages," analyst Carsten Brzeski of ING Diba bank said, while Germany's refugee crisis will continue to bolster state spending.

Investment remains "the economy's Achilles heel," he noted, adding that Chancellor Angela Merkel must produce "a clear vision for Europe" with other EU leaders to reassure investors in Germany.