German economy to grow strongly in Q3 despite Brexit risks: Bundesbank

[FRANKFURT] The German economy, Europe's biggest, will continue to expand strongly in the third quarter, despite potential risks from the British vote to quit the European Union, the German central bank or Bundesbank said on Monday.

After growth slowed in the second quarter of 2016, "the underlying economic trend remains very strong and a sharp increase in overall economic output can be expected in the summer quarter," the Bundesbank wrote in its latest monthly report.

In the period from July to September, the main driving factors behind recovery - the very favourable situation on the labour market, rising wages and expansive fiscal policy - "remain intact," the report said.

"Continued positive sentiment among companies and households suggest that the slowdown in growth in the second quarter will only be temporary," the central bank continued.

"It is currently difficult to forecast the economic fallout for Germany (from Brexit), but it is likely to remain limited, at least in the short term," it said.

German gross domestic product (GDP) expanded by 0.7 per cent in the first three months of this year, but is expected to have slowed in the second quarter.

The Bundesbank is currently pencilling in GDP growth of 1.7 per cent for the whole of 2016.

AFP