German Growth Broadens as Economy Has Best Quarter in a Year

german business confidence

The German economy is firing on all cylinders.

From consumer spending to investment to exports, all parts of the economy helped to push growth to 0.6 percent in the first quarter, the fastest in a year, according to data on Tuesday. And momentum is set to remain strong: Business confidence probably rose in May to the highest level in almost six years, according to a Bloomberg survey of economists.

“This is a very bright picture of the German economy,” said Jens Kramer, an economist at NordLB in Hanover. “Growth is healthy because consumer spending is strong and investments are strong while trade continues to contribute to the expansion.”

Construction surged the most in three years as mild winter weather bolstered activity. Spending on new equipment increased at the fastest pace since the end of 2015, according to the statistics office. The seasonally adjusted increase in gross domestic product matched a May 12 estimate.

Germany, Europe’s largest economy, has been key to the euro area’s recovery, which European Central Bank President Mario Draghi says is becoming increasingly solid and broad. Ahead of a policy meeting in early June, officials are debating whether the downside risks to the region’s economic outlook have diminished enough to start a gradual exit from unconventional measures.

Bundesbank President Jens Weidmann said on Monday that the economic upswing in the currency bloc, Germany’s largest export market, is set to continue, and that the gradual decline in unemployment will bolster wages and domestic price pressures.

“If this development continues on a sustained basis, monetary policy normalization will also near,” he said.

Also on Monday, the Bundesbank said that it expects Germany’s economy to grow at a robust pace in spring, supported by “lively” foreign and domestic demand.

That prediction may be underpinned by a jump in business confidence. The Ifo Institute will say its sentiment gauge rose to 113.1 this month, the highest since July 2011, from 112.9 in April, according to a Bloomberg survey. Growth in manufacturing and services activity probably remained close to the fastest in six years, according to a separate poll before a purchasing managers index.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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