Consumers help German economy to rebound in Q1

Business

Cruise ships are seen on the river Main during sun set in Frankfurt, Germany, Tuesday, May 7, 2019. (AP Photo/Michael Probst)

BERLIN (AP) — The German economy returned to growth in the first quarter on the back of solid consumer spending and a construction boom, official figures showed Wednesday.

Europe’s biggest economy grew by 0.4% during the January-March period compared with the previous quarter, according to the Federal Statistical Office.

That was in line with economists’ expectations and a big improvement from the previous two quarters. The economy contracted by 0.2% in the third quarter of 2018 and flat-lined in the final three months, narrowly avoiding a recession, usually defined as two consecutive quarters of negative growth.

Over recent months economists and officials have downgraded their forecasts for the German economy as a result of global trade tensions, uncertainty over Britain’s exit from the European Union and after-effects of last year’s economic wobble, a result largely of new car emissions standards.

The government’s full-year growth forecast currently stands at 0.5%, compared with 1.8% late last year. It sees growth accelerating to 1.5% in 2020.

ING economist Carsten Brzeski said the rebound suggests any panic about the state of German economy was overblown but that there is no room for complacency.

“Some of last year’s one-off factors have turned around,” he said. “The German automotive industry might have seen better times but should not be written off and private consumption remains solid.”

UniCredit economist Andreas Rees cautioned that “the German economy is not out of the woods yet.”

“Less dynamic growth or even stagnation seems to be unavoidable in the second quarter,” he said. “Furthermore, an outright trade war between the U.S. and China and U.S. car tariffs would put German exports under strong pressure.”

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