German economy to rebound in Q2: Bundesbank

The German economy should rebound in the second quarter after a weak start to the year, the Bundesbank announced Monday, as a wave of flu dissipates and state spending rises.

German growth halved to 0.3 percent in January-March compared with the previous three months due to weaker trade and less state spending. In addition, the threat of escalation in a trade row with the United States has clouded the outlook.

“After subdued growth at the start of 2018, the German economy should expand at a stronger pace in the spring,” the Bundesbank said in its monthly report.

It added that any rebound would not match the high growth levels seen last year, mainly because of weak activity in the industrial sector.

Industrial orders, output and exports fell in April, the third drop in the first four months of the year, signaling weakness that analysts mainly linked to long public holidays, cold weather and flu epidemics.

The Bundesbank said that in addition to higher state spending, a humming construction sector and strong private consumption should help the economy in the second quarter.

The German central bank slashed its growth forecast for this year on Friday and said trade and political concerns had made the outlook for the economy more uncertain.

Weaker demand from abroad and labor shortages at home had exposed weaknesses at the heart of the export-oriented and industry-heavy economy, it said.

The Bundesbank expected growth of 2.0 percent this year, well below the 2.5 percent it forecast in December.

While it raised its 2019 estimate to 1.9 percent from 1.7 percent, Bundesbank President Jens Weidmann injected caution in an otherwise positive economic outlook.

Source: Reuters