German Q2 growth likely to slow down sharply: Bundesbank

According to Bundesbank, Germany’s second quarter growth is likely to slow down sharply, before re-bounding later in the year to return to a solid growth path. Growth is likely to witness a setback in the second quarter, compared to that in the first quarter, largely owing to lower industrial export orders amid fluctuations in the construction sector, the central bank reported Monday.

Expanding at a quarterly rate of 0.7 percent, Germany was the driver of an unexpectedly strong first three months of 2016 for the euro zone economy, with strong investments and healthy industrial output suggesting that the bloc was on the upswing.

"The positive sentiment indicated by corporate and household surveys suggest that economic growth after a weak second quarter should increase again over the next six months," the central bank said.

Despite the positive effects of a relatively warm winter fading off and a dip in second quarter growth, the central bank still foresees full year growth at 1.7 percent, in line with last year's figure, supporting the European Central Bank's view that its extraordinary stimulus was adding to growth and reviving inflation. However, the estimated figure also matches the government’s growth forecast.

Analyzing recent ECB policy steps, the central bank said that its December measures, which included a rate cut and the extension of its asset buying program, will add between 0.1 percent and 1 percent to inflation per year between 2016 and 2018. However, the ECB’s March measures, which included another rate cut and further expansion in asset purchases, would add relatively less to the growth in inflation per annum, Bundesbank added.