German economic growth accelerated over the summer, data showed today, but analysts said the strong euro, high oil prices and credit market problems pointed to a looming slowdown.
Gross domestic product (GDP) increased 0.7 per cent on the quarter in seasonally adjusted terms in the July-September period, boosted by construction and equipment investment and a small gain in private consumption, preliminary Federal Statistics Office data showed.
The figure was in line with the mid-range forecast of 42 economists polled last week and confirmed a report by Reuters yesterday.
"Unfortunately, this is only the look into the rear-view mirror," said Andreas Rees at UniCredit in Munich. "In the meantime, headwinds are blowing strongly in the face of German companies and consumers."
"Both the euro exchange rate and the oil price have seemingly risen by the hour, dampening export activity and eating into Mr. Average Citizen's wallet. Hence, a growth dip in the quarters ahead is very likely."
Europe's largest economy grew 2.9 per cent in 2006, the fastest pace in six years, and the government expects relatively healthy expansion of 2.4 per cent this year.
Separate data today showed that the French economy, the euro zone's second biggest, also grew 0.7 per cent in the third quarter compared with the previous three months, the strongest quarterly rise since the second quarter of 2006.
German firms have been reaping the benefits of solid growth, corporate results show. Around three quarters of companies whose shares make up the German DAX top-30 stocks index have reported profits above market expectations in the quarter to end-September.
Salzgitter, Germany's second-largest steelmaker, boosted underlying nine-month pretax profit from operations by 48 per cent, the company said today.
However, the recent leap in oil prices, the euro's surge to record highs against the dollar and difficulties on global credit markets have depressed business and consumer confidence in recent months and prompted warnings of a slowdown.
The Ifo institute's closely-watched business sentiment survey showed morale deteriorated for the sixth month running in October and a monthly gauge by the GfK research group suggested the mood among consumers probably worsened again this month.