German Chancellor Angela Merkel presented with a traditional Chinese dessert for her 56th Birthday, while on her visit to China, July 17, 2010. Chinese Premier Wen Jiabao is on her left.

Germany's Economics Ministry said on Sunday that after a quieter winter hit by severe weather, the German economy experienced strong economic growth in the spring. The GDP (gross domestic product) is likely to have increased in the second quarter, significantly higher than in the first quarter of this year which grew by 0.2 %.

In its monthly report, the ministry said in addition to catch-up effects - - due to weather-related production falls in winter - - which aided construction, growth has been mainly dependent on a strong expansion in industrial production. Industry is benefiting both from external demand as well as a revival of investment activity in the country. Thanks to a continuing strong demand for industrial products from home and abroad, it is estimated that industrial activity in the coming months will remain positive.

Also in the labour market, the economic recovery is increasing. The report said the improved condition of the labour market will also benefit from increasing private consumption in the course of the year. Overall, the recovery process in Germany has further broadened and strengthened. However, the report says there are still a number of economic risks. The recovery of the global economy is not yet self-supporting in some important industrial countries while in some emerging markets there are already signs of overheating. The euro debt crisis remains a downside factor, and several national and international leading indicators in recent months, although still positive, have deteriorated, reflecting the risk factors.

Based on a significantly improved order situation, the recovery in industry continued with an increase in production by 2.6 % in May, from the previous month. A buoyant investment and expanding international business ensures a robust expansion of industrial output by 3.4 %. The production in the construction industry revived after the exceptionally strong fall in the first quarter.

The previous year's levels of production in particular in industry is up +13.7 %, but construction also increased +3.8 %. The order activity both in industry and in construction continued to be relatively brisk. The demand in industry slowed in May, although slightly (- 0.5%), but the trend remains sharply upward with strong demand from both the domestic and from abroad. Continued momentum in the construction industry in the current year, mainly results from the 2009 economic stimulus packages. Residential construction will expand slightly with rising building permits.

The ministry said private consumption expenditure in the second quarter has been quite restrained. Retail sales (excluding vehicles) increased in May but significantly by 3.0 %, they remain unchanged when the three-month trend is compared.
Exports in current prices in May rose by 9.2 % with a significantly greater increase in imports (+ 14.8 %).

The rise in employment in recent months continued in May with a continued increase in seasonally adjusted employment by 38,000 people. The seasonally adjusted unemployment fell in June by 21,000 and overall, in the month, 3.153 million unemployed were registered, 257 000 less than a year ago. The number of vacancies continues to increase.

The magazine, Der Spiegel, said the government expects GDP growth for the second quarter may have topped 1.5%, rather than the 0.9% previously forecast. Should the trend continue, GDP growth could be well above 2% in 2010, Spiegel says, citing government estimates.

The current official government forecast for 2010 GDP growth is currently 1.4%.