Germany books record budget surplus in first half

FRANKFURT AM MAIN: European powerhouse economy Germany notched up a record government budget surplus in the first half of 2018 as well as rebounding to stronger growth in the second quarter, official data showed Friday.

Federal, state and municipal coffers added together were 48.1 billion euros ($55.7 billion) in the black between January and June, federal statistics authority Destatis said, up 18.3 billion euros year-on-year.

"Favourable employment and business developments, as well as a moderate spending policy" contributed to the surplus, which amounted to 2.9 percent of gross domestic product, Destatis said.

The statisticians cautioned that the figure for the first half-year did not necessarily point to a similar overshoot over all of 2018. And swollen government accounts are unlikely to be welcomed beyond Germany's borders.

Berlin is regularly criticised by its European and American partners and by organisations like the International Monetary Fund for failing to invest enough in areas like infrastructure or the military.

Destatis also confirmed data released earlier this month showing that the German economy expanded by 0.5 percent quarter-on-quarter between April and June, adjusting for price, seasonal and calendar effects.

The strong reading largely dispelled fears of a slowdown in the eurozone engine room after a weaker first three months. But large neighbours like France and Italy reported much weaker growth.

Most of the drivers for higher second-quarter growth were found at home, with households and the state increasing consumption spending and higher investment in equipment and construction. Meanwhile, growth in exports was outpaced by growth in imports.

"Defying the often-heard international criticism, the economy is already showing a very balanced growth model," economist Carsten Brzeski of ING Diba bank commented.

Meanwhile, tensions between the European Union's and US President Donald Trump over his "America First" trade policy "were a threat but did not leave any significant marks on the economy," he added.

"Obviously, this could change in the coming months" if a fragile trade truce struck with Washington fails to hold, Brzeski warned.