German economy is growing slightly: construction investments and exports as drivers

German economy is growing slightly: construction investments and exports as drivers

The German economy recorded slight growth at the beginning of the year, with real gross domestic product increasing by 0.2 percent compared to the previous quarter. This delicate growth was mainly driven by an increase in construction investment and exports. However, there was a downward trend in private consumer spending from January to March, which clouds the moderate growth expectations of the federal government, which is counting on a recovery in private consumption over the remainder of the year. Federal Minister of Economics Robert Habeck forecast growth of 0.3 percent for the year as a whole.

Germany posted slow growth in the first quarter, helping the European Monetary Union emerge from recession. During this period, gross domestic product in the euro area grew by 0.3 percent compared to the previous quarter. The European Central Bank forecasts growth of 0.6 percent for the year as a whole and expects the economy to pick up in the second half of the year. However, at 0.3 percent, German growth rates are well below the euro area average.

The positive growth figures are being received positively by economists because they signal the end of an economic trough. Despite the slight growth, growth-enhancing reforms are seen as necessary to avoid low growth rates. The expectation is that private consumption will pick up over the remainder of the year, supported by rising real incomes. Cologne

Commerzbank chief economist Jörg Krämer noted that growth in the first quarter was partly due to mild weather, which could lead to a slowdown in growth in the second quarter. Commerzbank is now predicting stagnation this year after previously assuming an economic contraction. Despite positive signals such as rising surveys, there are concerns about new orders in the German manufacturing sector.

German growth hopes for this year could be dampened by a sharper economic downturn at the end of last year. Statisticians' revised figures show that real gross domestic product fell by 0.5 percent in the fourth quarter of 2023, which could leave it in a difficult position to achieve positive growth this year. Nevertheless, the growth rate for last year was revised upwards slightly as economic output fell by 0.2 percent rather than 0.3 percent as previously assumed.

Economic growth in other large countries in the European Monetary Union such as France, Italy and Spain developed surprisingly positively at the beginning of the year. These countries each recorded growth rates between 0.2 percent and 0.7 percent in the first quarter, due to various factors such as tourism and low energy costs.