The German economy grew more than expected in the second quarter on the back of strong domestic demand.

GDP expanded 0.5% on a quarterly basis after price, seasonal and calendar adjustments, compared with an upwardly revised 0.4% reading in the first quarter, provisional data from the Federal Statistical Office showed. Econoday had predicted second-quarter German GDP growth of 0.4%.

Data showed positive contributions from domestic demand, with final consumption expenditure and capital formation posting growth, the statistics office said.

On an annual basis, the economy grew 2.0% in the second quarter, after price and calendar adjustments, following a revised year-over-year expansion of 2.1% in the first three months of the year. The Econoday annual GDP growth consensus estimate was at 2.1%.

"Looking ahead, challenges for the German economy are likely to increase rather than decrease, both from the outside and within," said Carsten Brzeski, chief economist at ING Germany.

"As regards external risks and challenges, trade tensions could easily return, despite some recent relief. The latest events in Turkey illustrate that geopolitical risks are unlikely to disappear."