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German economy grows at fastest in two years on domestic demand

[WARSAW] Germany's economy grew at its fastest pace in two years at the start of 2016 as spending domestically helped offset weakness in global trade.

Gross domestic product rose a seasonally-adjusted 0.7 per cent in the three months ended March 31, the Federal Statistics Office in Wiesbaden said on Friday. That beat the 0.6 per cent estimate in a Bloomberg survey of economists. The economy expanded 1.6 per cent from a year ago.

Germany has benefited from record-low unemployment that has supported consumer demand, while European Central Bank stimulus is driving a cyclical recovery in the 19-nation euro area as a whole.

Even so, the Bundesbank has said it sees signs of slowing momentum in Germany this quarter and concerns remain that a slowdown in China, the country's third-biggest trading partner, will weigh on demand.

"Private households and the state raised their consumer spending at the start of the year," the statistics office said in a statement.

"Considerably more was invested in construction and equipment," in part because of mild weather.

Incoming data backs the view that the pace of growth may be slackening. Industrial production slumped in both Germany and the euro zone in March, and though German exports picked up, imports shrank. Business confidence in the country deteriorated last month.

Growth figures for the currency bloc are scheduled to be published by Eurostat at 11 am in Luxembourg. Economists in a separate Bloomberg survey predict the region's expansion accelerated to 0.6 per cent last quarter, in line with a preliminary estimate released two weeks ago.

The report will be preceded by GDP data from the Netherlands at 9:30 am, Italy at 10 am, and Portugal at 10:30 am Greece wll report at 11 am.

BLOOMBERG