(Bloomberg) -- The German economy accelerated in the second quarter, driven by stronger domestic consumption and a slight pickup in investment.

Gross domestic product increased 0.5 percent in the three months through June, according to figures published Tuesday. The reading follows revised growth of 0.4 percent at the start of 2018 and outpaces the median estimate in a Bloomberg survey. A report later in the day is expected to confirm the euro area expanded at the weakest pace in two years.

So far, solid domestic demand in Europe’s largest economy has shielded the region from the worst effects of global trade tensions, but companies are increasingly concerned about the outlook. New numbers in China hint at a mid-year rough patch for growth, and there’s also turmoil in Turkey that’s sent the lira down 40 percent this month and spread to other emerging markets.

Germany’s statistics office said second-quarter growth was bolstered by an increase in private and government spending. Equipment investment and construction gained “somewhat.” Imports rose stronger than exports.

“The German economy is starting to find its new cruising speed,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “After several quarters of extremely fast growth, switching into a lower gear is actually healthy. We’ve seen an easing of labor shortages and delivery times as a result.”

The data come after the euro area’s second and third-largest economies disappointed in the second quarter. French growth unexpectedly failed to accelerate, after a series of national strikes dragged down output. Italy’s expansion slowed to the weakest in almost two years.

Protectionist Threats

While European Central Bank President Mario Draghi has singled out protectionism as a prominent risk, he also upheld his confidence in the underlying strength of the euro area.

Slovakia will publish its GDP figures at 9 a.m. in Bratislava before the Netherlands reports half an hour later, followed by Portugal at 10 a.m. Eurostat will update its estimate for euro-area growth at 11 a.m., when industrial-production data for June will also be available.

Signs have increased recently that momentum in Germany’s economy is building. Surveys of private-sector business activity have risen for the past two months, and the Bundesbank has said it sees a slight pickup on the back of private consumption.

At the same time, factory orders -- a gauge of future output -- showed the first annual decline in almost two years in June, the month before the U.S. and the European Union agreed to work toward lower trade barriers.

Investor confidence in August will indicate whether the deal stabilized economic prospects, after sentiment slid last month to the lowest since 2012. ZEW will publish indexes for Germany and the euro area at 11 a.m. Frankfurt time.

Business Outlook

Carmakers including Volkswagen AG, Daimler AG and BMW AG have warned against the fallout from increased trade tensions, but some other German companies have expressed optimism. HeidelbergCement AG confirmed its outlook for 2018 even after negative currency effects damped second-quarter revenue, and cargo container shipping company Hapag-Lloyd AG predicted a better second half and said trade tensions haven’t yet left a mark on business.

While the EU and the U.S. pledged not to introduce new tariffs as long as negotiations are ongoing, the specter of a trade war still looms large. The ECB said last week that if all threatened trade measures are implemented, the average U.S. tariff rate would rise to levels not seen for 50 years.

(Updates with chart. A previous version of this story was corrected to show first-quarter GDP was revised.)

--With assistance from Kristian Siedenburg, Harumi Ichikura and Andre Tartar.

To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow

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