German Economy Grew 0.7% In Q1 On Back Of Domestic Demand

The German economy grew at a faster pace in the first quarter of 2016 compared to the last quarter of 2015, data released Tuesday by the country’s statistics office showed. Germany’s gross domestic product (GDP) grew by 0.7 percent in the January-March period, up from the 0.3 percent growth in the October-December term.

The 0.7 percent growth figure was the same as the first estimate announced on May 13 by Destasis, Germany’s statistics bureau. During the first quarter of 2015, the GDP had grown by 0.4 percent.

The quarter-on-quarter growth in Europe’s largest economy was led by an increase in domestic demand. Gross fixed capital formation in construction increased by 2.3 percent, partly helped by a mild winter, while gross fixed capital formation in machinery and equipment rose by 1.9 percent. Household consumption expenditure went up by 0.4 percent — helped by record-low unemployment — and government consumption expenditure climbed 0.5 percent, the data showed.

Exports also increased — signaling an increase in external demand — by 1 percent, but they were outweighed by a 1.4 percent increase in imports, which led to a net downward effect of 0.1 percentage points on GDP growth.

However, performance for the ongoing quarter is expected to be milder than the first quarter.

Johannes Gareis, an economist at Natixis in Frankfurt, told Bloomberg: “Looking to second-quarter growth, we think the German economy is unlikely to repeat the blockbuster performance seen in the first quarter, also due to some payback from the boost to construction investment from mild weather.”