German economy skirts recession in first quarter

The German economy skirted a recession at the start of the year, growing modestly but more than expected thanks to investment in construction and exports, preliminary data showed today.

The economy grew slightly in the first quarter, with gross domestic product rising 0.2% on the previous three-month period in adjusted terms.

Analysts polled by Reuters had forecast a 0.1% increase.

The statistics office also revised the data for the last quarter of last year to a 0.5% contraction, from a more modest slump of 0.3% that was previously reported.

Last week the German government raised its economic growth forecast for this year to 0.3%, from 0.2% previously, and lowered its forecast for inflation by 0.4 percentage points.

The German economy, Europe’s biggest, was the weakest among its large euro zone peers last year, as high energy costs, feeble global orders and record high interest rates took their toll.

Although inflation is expected to ease this year, growth is forecast to remain relatively weak, with GDP only projected to grow by 1.0% in 2025.

Private consumption is expected to contribute significant growth momentum as real wages are expected to rise in a resilient labour market.

Data from the statistics office showed today that German retail sales rose more than expected in March, up 1.8% on the month, pointing to a recovery in consumption at the end of the quarter and boding well for the overall economy.

The anaemic economic growth has caused only limited harm to the labour market.

The Federal Labour Office said today that the number of unemployed grew by 10,000 in seasonally adjusted terms. Analysts polled by Reuters had expected that figure to rise by 9,000.

The seasonally adjusted jobless rate remained unchanged at 5.9%.

“Although the German economy has been struggling for two years, the situation on the labour market remains robust,” said Daniel Terzenbach, from the Federal Labour Office, in the presentation of the data.

There were 701,000 job openings in April, 72,000 fewer than a year ago, the Federal Labour Office said.