Investment and consumption fall Germany's economy contracted in the second quarter

Germany's economy came under pressure in the second quarter as investment and consumer spending fell, dashing hopes of breaking out of years of stagnation.

Data released by the German statistics office on Tuesday (August 27) showed that gross domestic product (GDP) contracted 0.1% in the second quarter from the previous quarter, with capital investment falling 2.2% and private consumption falling 0.2%. Government spending, meanwhile, rose 1 per cent.

Bloomberg reported that despite a solid start to the year, Germany is struggling to maintain growth momentum. Recent indicators point to a deterioration in business sentiment, particularly in the key manufacturing sector.

The ifo business expectations index fell for the third month in a row in August and its president, Clemens Fuest, warned that Germany was "in crisis".

Carsten Brzeski, an economist at ING, said in an emailed note that German growth in the second quarter was disappointing and that almost all confidence indicators were falling, and that the German economy was now where it was a year ago: stagnant, with growth at the bottom of the euro zone.