BERLIN (Reuters) – Strong investment and spendthrift consumers drove the German economy to its fastest growth in three years in the first quarter, but the expansion was helped by milder than usual winter weather and is expected to slow.
Data from Germany’s Federal Statistics Office on Friday showed Europe’s largest economy grew by a seasonally-adjusted 0.8 percent on the quarter between January and March. That was in line with an earlier flash estimate.
On the year, gross domestic product (GDP) expanded by 2.5 percent.
Traditionally the backbone of the economy, exports suffered from weakness in the country’s trading partners and were actually a drag on growth.
“Positive impetus came exclusively from within the country in a quarter-on-quarter comparison,” the Statistics Office said.
Domestic demand added 1.7 percentage points to GDP in the first quarter, while foreign trade subtracted 0.9 percentage point from growth. Private consumption added 0.4 percentage points.
Plant and equipment investment grew by 3.3 percent, the strongest level in 3-1/2 years, while construction investment, up 3.6 percent, was the strongest on the quarter in three years.
The world’s biggest luxury carmaker BMW AG said earlier this month investment in a raft of new models would help it achieve record sales this year. The firm is spending heavily in a bid to stay ahead of rivals.
The Statistics Office confirmed growth in Europe’s largest economy doubled from the end of last year from a fourth-quarter rate of 0.4 percent.
That makes Germany the growth locomotive of the euro zone’s 9.5 trillion euro economy, which expanded by only 0.2 percent in the first quarter, according to preliminary data.
But as other euro zone countries such as Spain, which had to take strong medicine to improve competitiveness, are starting to see benefits, some economists expected trade to help Germany again as well.
“We expect that exports will gain speed too. The rest of the euro zone is not doing so badly anymore,” said Holger Sandte of Nordea. His bank would raise its GDP forecast for 2014 to 2.0 percent from 1.8 percent, he added.
The German government expects domestic demand to drive 1.8 percent growth this year – slower than the first-quarter rate – and Finance Minister Wolfgang Schaeuble has said everything points to a broad economic pickup.
(Reporting by Annika Breidthardt, Michelle Martin and Stephen Brown)
