Brandenburg Gate in Berlin, Germany

Germany GDP Q1 2018

Germany: German economy bounces back in Q1

The economy expanded 0.4% in Q1 2019 from the previous quarter, on a price-, seasonally- and calendar-adjusted basis, up from the fourth quarter’s flat reading and above market expectations of a softer expansion. Compared to the same period a year earlier, the economy grew 0.6% in price-adjusted terms, down from Q4’s 0.9% year-on-year expansion.

Domestic demand drove the economy in the first quarter. Fixed investment was particularly strong in the construction sector and in equipment, while household expenditure should have benefited from a tightening labor market, a slight increase in already-elevated consumer sentiment and moderating inflationary pressures. Government expenditure, meanwhile, decreased slightly. The data also showed that both exports and imports increased over the previous quarter.

A detailed breakdown of the GDP components is expected to be released on 23 May.

Looking ahead, given that data on the first quarter surprised on the upside, full-year growth expectations are likely to be revised over the coming weeks. (Analysts had previously penciled in a meager growth rate for the German economy.) That said, as highlighted by Carsten Brzeski, chief economist at ING Germany: “Just as weak GDP data in the second half of 2018 was not purely a result of wrong policies and business decisions or a sign that the German economic business model should be discarded, so today’s strong data is no reason for complacency. In fact, the economy still needs more investment, both from the private and public sectors, as well as new structural reforms.”

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