German economy accelerates in 1st quarter

AP News
Posted: May 13, 2011 2:51 AM
German economy accelerates in 1st quarter

The German economy, Europe's biggest, grew by 1.5 percent in the first quarter as investment and spending at home bolstered buoyant exports, official data showed Friday.

The quarter-on-quarter rise was above economists' forecasts and nearly four times the figure of 0.4 percent for the final three months of last year. That figure was depressed by an early spell of harsh winter weather.

The January-March figure was the strongest since a 2.1 percent spurt of gross domestic product growth in last year's second quarter. The Federal Statistical Office said that "the pre-crisis level of early 2008 has been exceeded already now."

In year-on-year terms, GDP grew by 5.2 percent _ the strongest performance since German reunification two decades ago.

The German economy has benefited over the past year from strong demand for machinery, cars and other goods from a recovering global economy _ coupled with improving domestic demand. It hasn't yet shown signs of being ruffled by debt troubles and anemic growth elsewhere in Europe.

Data released earlier this week showed that German exports and imports both rose in March to their highest monthly level since the country started keeping records in 1950.

However, "the balance of exports and imports had a smaller share in the strong GDP growth than domestic uses" this time around, the statistical office said. It pointed to investment in equipment and construction, as well as consumer spending.

"The strong labor market, richly filled order books and simply the right export mix at the right time bode well for future growth," said Carsten Brzeski, an economist at ING in Brussels.

He said that, following full-year growth of 3.6 percent in 2010, Germany looks set for growth of at least 3 percent this year.

"With the strengthening labor market, wage increases and pent-up demand, private consumption should become the next important growth driver," he added.