Domestic demand fueled German Q1 growth: official data

24th May 2011, Comments 0 comments

Germany's solid first quarter growth was based more on domestic demand than its export sector, detailed data released on Tuesday by the national statistics office showed.

Only one third of the quarterly growth rate of 1.5 percent in the first three months of the year was the result of foreign trade, while the rest came from domestic investment and consumption, the Destatis office said.

A breakdown of the numbers showed the strongest increase in capital formation in construction, which gained 6.2 percent from the previous quarter.

Investment in machinery and equipment expanded by 4.2 percent compared with the last quarter of 2010, which was marked by an early arrival of winter.

Household consumption gained a modest 0.4 percent while government spending grew by 1.3 percent.

On an annual basis, the German economy, Europe's biggest, gained 5.2 percent, its strongest rate since the country was reunified in late 1990, and when corrected for calendar effects the increase was still 4.9 percent.

The first quarter jump surprised analysts and caused many to revise their 2011 German growth estimates higher to 3.0 percent or more, compared with the official forecast of 2.6 percent.

On Monday however, the Markit economic research group said its composite purchasing managers index for the German industrial and service sectors had fallen in May from 59.2 to 56.4 points.

That level still indicates economic expansion however, and was in line with forecasts for somewhat slower growth later this year.

The widely watched Ifo survey of German business sentiment should provide a clearer picture when it is released later on Tuesday.

© 2011 AFP

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