Berlin: Germany's economy grew at the fastest rate since reunification in the second quarter as companies stepped up investment and exports surged, providing fresh evidence that the recovery has shifted up a gear.
Gross domestic product grew 2.2 per cent on the quarter, beating all projections in a Reuters poll of 34 economists who gave a consensus forecast for 1.3 per cent growth.
First-quarter growth was also revised up to 0.5 per cent from 0.2 previously, Federal Statistics figures showed on Friay.
Economy Minister Rainer Bruederle said growth of well over two per cent was now possible for the full year — far above the government's official forecast of 1.4 per cent.
"We can't speak of a growth miracle but we are certainly in an XL-upswing," Bruederle said.
Several economists said they expected the economy — Europe's largest — could grow by at least 3 per cent this year, as did the country's Ifo economic institute said.
"A three in front of the [decimal] point is within reach this year," Ifo chief economist Kai Carstensen told Reuters in an interview.
Deutsche Bank economists even forecast 3.5 per cent growth, though they expected a slowdown in 2011.
The German economy last grew by more than 3 per cent in a full year in 2006, when it expanded by 3.4 per cent.
The super-strong reading boosted euro zone GDP as well. GDP in the currency bloc grew by 1.0 per cent quarter on quarter, its fastest pace in more than three years.
The euro gained ground after the German data and European stock markets rose.
Bruederle said the GDP numbers showed the government should continue its 80-billion euros austerity drive to rein in a bloated budget deficit, although higher growth will boost the government's coffers dramatically.
Some in Chancellor Angela Merkel's government have argued the public should receive a "dividend" from the growth, but senior policymakers say Germany must use the upswing to reach its consolidation target in the next four years.
The coalition of conservatives and pro-business Free Democrats has struggled to convert plans into reality due to internal bickering, which analysts say must end if the government wants to emerge from a deep slump with popular support.
Germany has its exports to thank for recovering from its deepest post-war recession, especially as the weaker euro — down over 10 per cent against the dollar since the start of the year — makes its products cheaper outside the currency bloc.
Analysts remain cautious about the pace of growth going forward as budget cuts kick in across Europe, dampening demand for German products, while the US economy is also struggling.
"It is almost needless to say that the current growth momentum is hardly sustainable in the coming months," said Carsten Brzeski, economist at ING Financial Markets.
