Germany raises 2015 growth forecast to 1.8% on consumer spending

[BERLIN] Germany's government expects Europe's largest economy to expand 1.8 per cent this year as consumers spend more, raising an earlier forecast.

The new figure compares with a previous outlook from January for 1.5 per cent growth in 2015, the Economy Ministry said on Wednesday in Berlin. Growth will maintain its 1.8 per cent pace next year as corporate investments pick up while consumer spending slows.

"Driven by a continued strong performance in the labour market with rising wages and increasing employment, Germany is on a solid growth path," Economy Minister Sigmar Gabriel said in an e-mailed statement.

"Private consumption provides the support for the upswing."

German unemployment dropped to a record low in March as the labor market continued to underpin the country's position as Europe's economic powerhouse. While Germany's leading economic institutes have called on the government to seize on the brighter economic outlook to cut taxes, Mr Gabriel said the government will boost investment to improve future growth prospects.

"We need to make efforts especially to improve our medium- term growth prospects," Mr Gabriel said. "Investment in education and research, in infrastructure, as well as a better environment for private investment, are important starting points."

BLOOMBERG