Germany comes back to growth in Q1, helped by construction, consumption

Germany comes back to growth in Q1, helped by construction, consumption

The German economy came back to growth in the first quarter as householders spent all the more uninhibitedly and construction activity picked up, yet the government forewarned that the viewpoint stayed clouded by trade disputes.

Gross domestic product (GDP) rose 0.4% quarter-on-quarter, Wednesday’s Federal Statistics Office information appeared. Year on year it grew a calendar-adjusted 0.7%. Both fundamental readings were in line with market expectations.

“The international trade disputes are still unresolved. We must do everything possible to find acceptable solutions that enable free trade,” Altmaier said.

The U.S. what’s more, China have increase their trade conflict, with Beijing this week declaring new tariffs against U.S. imports after Washington increase imposes on Chinese imports. Both countries are significant markets for German exporters, which means the levies are harming their businesses too.

U.S. President Donald Trump may likewise this week increment tariffs on European car imports, which would disproportionaty affect Germany.

Altmaier, a compatriot of traditionalist Chancellor Angela Merkel, rehashed a call to help companies by cutting formality and taxes. Account Minister Olaf Scholz, a Social Democrat, has declined to cut corporate taxes.

The Statistic Office said growth was mainly driven by construction and increased household spending. Corporate investments in machinery and equipment also helped, while state spending was slightly negative.

MIXED SIGNALS

“The trade development sent mixed signals as exports and imports both picked up on the quarter,” the office said, leaving open the question whether net trade had a positive impact on GDP.

The Office will publish progressively nitty gritty development information next week which should shed more light on which sectors of the economy contributed to growth and to what extent.

It affirmed that the German economy shrunk by 0.2% in the third quarter of last year and stagnated in the fourth.

Headwinds from abroad suggest any growth bounce back this year is probably going to be unassuming.

“In normal times, today’s growth figures would be reason enough to revise up GDP projections,” DekaBank analyst Andreas Scheuerle. “But in light of the massive threats for world trade, economists are likely to keep their powder dry.”

German exporters are also struggling with weaker foreign demand and uncertainty caused by Britain’s chaotic departure from the European Union.

The government halved its 2019 growth forecast to 0.5% last month. That would mark a sharp slowdown after expansion rates of 2.2% in 2017 and 1.4% in 2018.

ING economist Carsten Brzeski said the growth figures should be no reason for complacency. “In fact, the economy still needs more investment, both from the private and public sectors, as well as new structural reforms,” Brzeski said.