The German economy’s return to growth in the first quarter was hampered by declines in construction activity and investment as a severe winter and a recession in Europe dampened demand.
Construction fell 2.1 percent from the fourth quarter and capital investment dropped 1.5 percent, the Federal Statistics Office in Wiesbaden said yesterday.
GDP increased 0.1 percent, the office said, confirming a May 15 estimate. From a year earlier, the economy shrank 0.2 percent when adjusted for working days.
With the 17-nation euro area mired in recession and the coldest March in a quarter-century freezing building activity, Europe’s largest economy has relied on domestic demand to haul it back to growth. GDP fell 0.7 percent in the fourth quarter of last year.
“The somewhat disappointing first-quarter result was due mainly to the cold weather and the sensitivity of companies to developments in the rest of Europe,” said Gerd Hassel, an economist at BHF Bank AG in Frankfurt. “While that uncertainty hasn’t quite fully dissipated yet, there should be a rebound in construction activity in the second quarter and we could see better-than-expected results.”
Household spending rose 0.8 percent in the first quarter, while public spending fell 0.1 percent, the office’s report showed. Exports dipped 1.8 percent and imports dropped 2.1 percent. Domestic demand did not add to growth as stronger consumption was offset by weaker investment, while net trade contributed 0.1 percentage point to GDP.
The Bundesbank, which in December predicted growth of 0.4 percent this year and 1.9 percent next year, will publish new forecasts next month.
The euro-area economy shrank more than economists forecast in the three months through March, extending its recession to a record sixth quarter. GDP in the region fell 0.2 percent after a decline of 0.6 percent in the previous quarter.
Meanwhile, German business confidence rose unexpectedly this month, data showed yesterday, as businesses express satisfaction with their situation and become more optimistic about the future.
The Ifo economic institute’s closely watched business climate index rose to 105.7 points this month from 104.4 points last month. Analysts had been expecting an unchanged reading this month.
“The firms are clearly more satisfied with their current business situation than in the previous month. The outlook for future business is unchanged and slightly positive,” the think tank’s economist Kai Carstensen said.
The GfK institute also reported yesterday said that its forward-looking consumer climate index rose to 6.5 points for next month from 6.2 this month, as people’s expectations for the economy and for their own income improve.
However, GfK cautioned that consumer confidence would be vulnerable if Europe’s debt crisis escalates again.
Additional reporting by AFP and AP
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