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'Just a blip' - German growth slows in first quarter on weak trade

Reuters  |  BERLIN 

By Michael Nienaber

BERLIN (Reuters) - German economic growth slowed slightly more than expected in the first quarter of the year due to weak trade, data showed on Tuesday, but analysts called it a blip and predicted Europe's biggest economy would shift into a higher gear again.

The German economy grew by 0.3 percent in the first three months - the slowest rate since the third quarter of 2016 - after expanding 0.6 percent in the final three months of last year, preliminary data from the showed.

Economists had on average expected growth of 0.4 percent, with forecasts ranging from 0.2 percent to 0.5 percent in a poll of 34 economists.

Still, it marked the 15th consecutive quarter of expansion in Europe's biggest economy, the longest period of uninterrupted growth since German reunification.

"Is it a pause or a fundamental shift? For us the answer is clear: It's just a blip," said, pointing to continued strong foreign demand and vibrant domestic activity due to record employment and rising real wages.

"However, this should not hide the fact that risks to the economic outlook have risen not least due to the neo-protectionist aspirations and sanctions policy of the U.S. government," Scheuerle said.

The statistics office said positive contributions in the first quarter came mainly from domestic demand while trade was weak.

"Investment rose sharply, with significantly more investment in construction, but also in equipment," the office said. Household spending rose slightly, it added.

On the year, the German economy grew by a calendar-adjusted 2.3 percent in the first quarter, the data showed. This was just short of the consensus forecast of 2.4 percent.

The office also confirmed full-year GDP growth of 2.2 percent in 2017 which translated into a calendar-adjusted rate of 2.5 percent. This was the strongest pace since 2011.

Economists have also blamed the slowdown in the first quarter on a flu epidemic, an unusually high number of strikes and an above-average number of holidays.

The government has said it expects the economy to bounce back in the second quarter due to full order books and high employment. For 2018 as a whole, the government forecasts 2.3 percent growth.

(Reporting by Michael Nienaber; Editing by Madeline Chambers)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, May 15 2018. 12:26 IST
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