German economy to grow by more than 2 percent this year

The German economy is set to grow by more than 2 percent this year adjusted for calendar effects, which would be the strongest rate in six years, the BDI industry association said as it lifted its growth forecast for Europe's biggest economy.

The outlook followed a more muted message from the Economy Ministry, which said the economy could lose some momentum in the second half after powering ahead in the first six months.

Record-high employment, rising real wages and ultra-low borrowing costs are driving a consumer-led upswing in the German economy that looks set to help Chancellor Angela Merkel win a fourth term in office in a federal election on Sept. 24.

The ministry is so far sticking to its 2017 growth forecast of 1.5 percent unadjusted, which would translate into 1.8 percent on a calendar-adjusted basis. But economists expect the government to raise that in its autumn outlook, due at the end of next month.

In the first half of the year German exports rose by almost 4 percent, BDI said. "We also expect a similar expansion rate for the second half," Germany's biggest industry association, which has a track record of nailing the data, said.

The International Monetary Fund said in July it expected the German economy to grow by 1.8 percent in 2017 and by 1.6 percent in 2018. This would be slightly below the 1.9 percent it achieved in 2016.

The monthly report chimed with economic data published this month that showed feeble domestic demand drove a surprise fall in industrial orders in July, while industrial production flatlined.

The German economy grew 0.7 percent on the quarter in the first three months of the year and 0.6 percent from April to June, driven by increased household and state spending as well as higher investments in buildings and machinery.