Wed, May 16, 2018 - Page 10 News List

German growth slows by half on lower trade

Bloomberg

Germany’s economy grew at the weakest pace in more than a year at the start of this year, part of a slowdown across the eurozone that the European Central Bank (ECB) says could prove temporary.

The 0.3 percent expansion in the first quarter was softer than economists had forecast and just half the pace seen in the final three months of last year.

The statistics office said growth was driven by domestic demand, while trade lost momentum.

From a year earlier, adjusted GDP rose 2.3 percent.

The slowdown in Europe’s biggest economy is further confirmation that the region had a sluggish start to the year, a development already apparent in business surveys and other indicators.

Yet ECB officials have dismissed a deceleration of eurozone momentum to 0.4 percent from 0.7 percent as a combination of factors such as a flu epidemic and colder weather, and expect it to dissipate in the course of the year.

“Whether this marks the end of a robust expansion or is just a bump in the road is crucial to understand as the ECB mulls the end of asset purchases. We think a modest amount of momentum has been lost, but that 2Q will see a rebound,” Bloomberg Economics analysts Jamie Murray and David Powell said.

Speaking on Monday, ECB Governing Council member Francois Villeroy de Galhau said growth remains solid and broad-based, and that policymakers were still likely to halt asset purchases this year.

The European Commission has also indicated it is not overly concerned and this month maintained its forecast that full-year growth would almost match the decade-high pace hit last year.

Still, threats ranging from trade tensions to higher oil prices and market volatility could act as a brake.

Bank of Finland Deputy Governor Olli Rehn on Monday said that risks to the medium-term outlook “seem to be tilted on the downside.”

However, the Bundesbank remains optimistic, saying that record orders should boost German output in the coming months.

Just last week, Siemens AG raised its outlook for full-year earnings and HeidelbergCement AG said the economic upswing would boost construction activity in its major markets after a long winter held back first-quarter results.

Germany’s statistics office said growth at the start of the year was bolstered by a pickup in equipment investment and construction, and a slight increase in private consumption.

Government spending declined for the first time in almost five years, with exports and imports also down.

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