German economy faces weak Q1 but Bundesbank expects rebound
A government spending spree, a strong labour market and pent-up household savings are fuelling optimism, says the central bank
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[FRANKFURT] The German economy continues to recover, although expansion in the first quarter will be weak – with a pickup expected only from spring, the Bundesbank said in a monthly economic report on Thursday (Feb 19).
Europe’s largest economy has been stagnant for the past three years, but a government spending spree, a strong labour market and pent-up household savings are fuelling optimism for a rebound.
“The economy is expected to continue its recovery in the first quarter, albeit with weak momentum,” the central bank said.
“From spring, the German economy is expected to grow more dynamically, driven primarily by fiscal stimulus.”
Construction is likely to take a hit from poor weather in the quarter, and private consumption is unlikely to remain at an elevated level, it added.
While the industry has secured some large orders, they are likely related to higher government spending on defence and infrastructure, and the sector’s competitiveness on export markets remains relatively weak.
The Bundesbank earlier forecast German economic growth to be below 1 per cent this year, with most of it skewed towards the second half of the year. REUTERS
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