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Emerging markets couldn't help Germany in Q2

Emerging markets, once an engine of German economic growth, couldn't compensate for Germany's slow growth, of 0.1 percent, in the second quarter. Until now, exporting to emerging markets helped Germany, Europe's biggest economy, show strong growth.

By Associated Press / August 16, 2011

A BMW logo is cleaned in Munich, southern Germany, last year. German automaker BMW AG announced this month that booming sales of its luxury cars and SUVs in China helped its profits more than double to about $2.5 billion in the second quarter. However, exports from German companies to emerging markets couldn't make up for the country's slow economic growth for the quarter.

Joerg Koch / AP / File

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FRANKFURT

Germany's economic growth nearly stalled in the second quarter, in another downbeat sign for the European and global economies.

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Its quarterly growth of only 0.1 percent was way below market expectations for a 0.5 percent increase and follows hard on the heels of similarly disappointing readings for France and the United States.

Until now Germany's economy, Europe's biggest, had been growing strongly as its world-renowned companies tapped export markets all around the world, particularly in faster-growing emerging markets. Its industrial prowess had in many ways cushioned it from a government debt crisis that's afflicting the 17 countries that use the euro.

Germany's state statistical agency said Tuesday that lagging consumer spending and construction investment were largely behind the growth slowdown in the April-June period.

As well as being below expectations, the second-quarter figure was way down on the 1.3 percent growth recorded in the first quarter, when the economy was boosted by strong exports of cars and industrial machinery. That figure was revised down from 1.5 percent in earlier releases.

Top German corporate executives have cautioned that growth could be less impressive in the second half of the year due to volatile raw material prices and economic and financial turmoil over the heavy levels of government debt in Europe and the U.S.

The second-quarter figure looked better compared with the same quarter a year ago, rising 2.7 percent.

Slowing growth in Germany weighs on overall growth in the eurozone. A slowdown in the zone's biggest country would give the European Central Bank more reason to avoid more interest rate increases this year. Analysts said the German figures may mean that eurozone economic growth for the quarter — due later — could well be below the 0.3 percent forecast.

The weak German figure follows a disappointing U.S. growth rate of an annualized 1.3 percent in the second quarter. European figures are usually given quarter on quarter.