The German economy could show moderate growth in the first quarter. It was unexpectedly helped by industry and construction. But signs of a significant recovery are still lacking, the German central bank Bundesbank said in its regular monthly report.
Decline
The central bank had long predicted a further contraction for the first quarter. However, unexpectedly favourable data at the end of the quarter reinforced hopes that the economy’s worst period of contraction was behind it after more than a year of stagnation or falling output.
“There is still no evidence of a sustained improvement in the German economy,” the central bank said. “Demand for industrial products from Germany and abroad remains weak and continues to decline.”
The construction sector was significantly boosted by exceptionally mild weather in the winter months, but the Bundesbank said this was a one-off factor that did not signal a change in the situation in the sector. “It is therefore not yet clear whether the growth in economic output will continue in the second quarter,” the bank said.
Interest rates
High interest rates and economic uncertainty continue to hamper investment. Households are hesitant to spend and there has been no turnaround in residential property construction.
Germany is the largest economy in Europe and the Czech Republic’s biggest trading partner. Germany’s gross domestic product (GDP) fell by 0.3 per cent in the fourth quarter of last year compared with the previous three months. The country fell into recession last year.
Source: ÄŒTK
