Germany expects growth to slow after strong first quarter

Mon Jun 20, 2016 9:25am EDT
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By Michael Nienaber and Balazs Koranyi

BERLIN/FRANKFURT (Reuters) - German economic growth is likely to slow after a robust start to the year, expanding at a slower pace for the rest of 2016 as foreign trade cools, the Finance Ministry and central bank said on Monday.

Europe's largest economy grew 0.7 percent between January and March, its strongest quarterly rate in two years, as soaring private consumption, higher construction investment and state spending on migrants more than offset weak foreign trade.

The government expects domestic demand to drive an overall economic expansion of 1.7 percent in 2016, on a par with last year.

In its monthly report, the Bundesbank said economic growth is likely to slow sharply in the second quarter before rebounding later in the year. The Finance Ministry took a slightly more positive view of the March-June period.

"The German economy had a good start to the second quarter," the ministry said in its monthly report.

"Economic indicators overall suggest a continuation of the economic upswing, albeit at a less dynamic pace than at the beginning of the year."

Rising employment, higher wages and low interest rates are boosting the purchasing power of German consumers, the ministry said, adding: "Altogether, the conditions for private consumption remain good."

The central bank said growth would dip compared to the first quarter due to lower industrial export orders and fluctuations in the construction sector and as the positive impact of a relatively warm winter wears off.   Continued...

A worker walks along rolls of Mercedes cars at a shipping terminal in the harbor of the town of Bremerhaven, Germany, March 8, 2012. REUTERS/Fabian Bimmer/File photo