German GDP Grows In Q1

Germany’s economy expanded for the first time in three quarters, driven by domestic demand, preliminary data from Destatis showed Wednesday.

Gross domestic product advanced 0.4 percent sequentially in the first quarter, after staying flat in the fourth quarter and contracting 0.2 percent in the third quarter of 2018. The latest growth rate was in line with expectations.

In the same period, economic growth in the euro area doubled to 0.4 percent from 0.2 percent in the fourth quarter, preliminary estimates showed.

Destatis said positive contributions to Germany’s GDP came from domestic demand. Fixed capital formation in construction, and in machinery and equipment, increased considerably.

Household final consumption expenditure also increased substantially on the previous quarter. Meanwhile, government spending logged a decline.

There were mixed signals regarding foreign trade as both exports and imports increased compared with the previous quarter.

On a yearly basis, GDP climbed a working-day adjusted 0.7 percent, which was slightly faster than the 0.6 percent expansion seen in the fourth quarter and in line with expectations.

However, on an unadjusted basis, economic growth eased to 0.6 percent from 0.9 percent a quarter ago. Destatis is set to publish more detailed GDP report on May 23.

Strong German growth in the first quarter suggests that any panic about the state of the Eurozone’s largest economy was overdone. However, there is still no room or time for complacency, Carsten Brzeski, an economist at ING, said.

Andrew Kenningham, chief Europe economist at Capital Economics, said the 0.4 percent growth is probably not the beginning of a sustained recovery in Germany.

The rebound in industrial production in the first quarter of this year was partly due to a weather-related increase in construction, which will not be repeated, Kenningham noted.

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