Germany growth to slow slightly in Q2, uptrend intact: ministry

6th June 2014, Comments 0 comments

The German economy, Europe's biggest, will book slower growth in the second quarter, after a robust start to the year, but the recovery remains intact, data showed on Friday.

Industrial output expanded only slightly in April, weighed down by a drop in construction activity, data compiled the economy ministry showed.

Nevertheless, exports rose strongly, causing the country's trade surplus to expand.

And the German central bank or Bundesbank upgraded its forecast for the whole year, saying the economy was on a "robust growth path."

"The German economy made a very buoyant start to 2014," the Bundesbank said.

"Even if it does not maintain the high rate of growth seen in the first quarter, the Bundesbank's economists are still confident about Germany's growth prospects," it said, pointing to strong domestic demand and an ongoing improvement in the economic situation of the industrial countries.

"The gradual recovery of the euro area suggests that Germany will follow a robust growth path," said Bundesbank chief Jens Weidmann.

The figures were published the day after the European Central Bank made major announcements of measures to boost the amount of cash in the eurozone economy.

The main decision was to charge banks for parking cash with the ECB, essentially to ward off deflation but with the parallel objective of stimulating activity, since the recovery in most eurozone countries is trailing behind Germany.

According to the Bundesbank's latest forecasts, German gross domestic product (GDP) was projected to grow by 1.9 percent in 2014 and then by 2.0 percent in 2015, followed by growth of 1.8 percent in 2016.

The latest trade data were also positive.

Germany's trade surplus -- the balance between exports and imports -- widened in April, driven by booming exports.

- Strength of German economy -

Industrial output, on the other hand, showed very muted growth of just 0.2 percent, according to economy ministry data.

By sector, manufacturing output edged up by 0.1 percent and energy output increased by 2.7 percent, while construction output contracted by 1.2 percent.

Analysts were nevertheless confident that the economic recovery in Germany is not in jeopardy.

"All in all, the latest data gives no reason to doubt the underlying the fundamental strength of the German economy. However, a slowing of the economy in the second quarter is clearly in the offing," said ING DiBa economist Carsten Brzeski.

In March, industrial output and exports had both fallen, casting doubt about the strength of the recovery.

And the latest data "have not entirely taken away these doubts," Brzeski said, suggesting that the Ukrainian conflict and the Chinese slowdown could be having a stronger impact on the real economy than originally anticipated.

Berenberg Bank economist Christian Schulz also said "the hard data seem to confirm the loss in industrial momentum. The second quarter is likely to be a bit weaker than the first quarter."

BayernLB economist Stefan Kipar believed that on the basis of positive factory orders data and robust confidence indicators, "the positive underlying trend continued in the second quarter."

The economy "likely grew moderately in the second quarter," Kipar said.

He said he was pencilling in GDP growth of 0.3 percent in the period from April to June after rowth of 0.8 percent in the first three months of the year.

© 2014 AFP

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