Germany Q1 GDP ticks up 0.7 pct on recovery in domestic demand

Germany first quarter gross domestic product grew higher by 0.7 pct, largely owing to domestic demand that more than offset the ongoing weakness in overseas trade of the country.

The final reading conveyed that the GDP is in line with a preliminary estimate published earlier this month, which showed growth in the first three months of the year exceeded market consensus. Economists had originally been anticipating growth of 0.6 pct for the first quarter compared to an expansion of 0.3 pct in the final quarter of 2015, data released by Destatis showed Tuesday.

Further, the latest purchasing managers’ index came in healthier than anticipated. However, analysts posit slight weakness in the private sector activity in May. PMI data released on Monday showed that the rate of increase in new orders was the weakest in the past ten months.

Moreover, capital formation was higher as well. Due to the continued mild weather, fixed capital formation in construction, as well as machinery and equipment was markedly up compared with the Q4 2015. According to provisional calculations, however, the development of foreign trade had a slight downside pressure on growth because imports increased more remarkably than exports, Destatis reported.

"The latest PMI surveys suggested that the pace of GDP expansion in the first quarter “will not be sustained," said Claus Vistesen of Pantheon Macroeconomics.