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Thriving German Economy Gives Europe a Boost


Good news emerged on Friday for a number of the world's economies. Figures show the European Union economy grew by one percent in the second quarter and in the United States retail sales rose in July. But, the economic boom comes with caveats.

The 16-nation eurozone grew by more than economists had expected - and that's largely the result of mammoth growth in Germany.

The figures released by the European statistics agency Eurostat show that the eurozone grew by one percent in the second quarter, that's up from only 0.2 percent in the first quarter.

In Germany, growth was 2.2 percent - that's higher than at any time since the fall of the Berlin Wall.

Howard Wheeldon, Senior Strategist at BGC Partners in London, says Germany has led the way for European growth.

"Germany is the powerhouse, the engine of the EU, it's the engine of the eurozone," he said. "Ultimately though, I do foresee that if the German strength continues at this pace it is going to cause additional problems for the eurozone."

He says it would be better for the Europe if the economies grew at an equal rate.

"If Germany is exporting somebody else is not," Wheeldon said. "That somebody that is not are the smaller countries within the eurozone economy. They are not benefitting in any way from the German strength. And of course if Germany is strong, then the euro gathers in strength - that makes it even worse for those countries that are struggling to make ends meet in the eurozone economy."

Also on Friday, the U.S. Commerce Department said retail sales rose in July for the first time in three months. That was largely due to high car sales. U.S. retail sales are important because they highlight private consumption, which accounts for around 70 percent of the U.S. economy.

But in China, economic growth appears to be slowing. Beijing announced Wednesday that several government indicators slowed slightly last month. It's a sign, analysts say, that the Chinese economy is beginning to cool after it grew rapidly in the first half of this year.

"There's been much talk about Chinese growth momentum slowing. I would perhaps prefer to look at it in another way and say that what's happening in China is that Chinese growth is settling and that's probably a more beneficial point and one that economists tend to ignore," says Howard Wheeldon.

The German economy is the largest in Europe. In 2009 it shrank by 4.9 percent - its worst performance since the Second World War.

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