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German economy returns to growth on consumer spending

By Religare

After an unexpected contraction at the end of last year, Germany has started this year on a positive note as Europe's biggest economy returned to growth in Q1 2013 as gains in household spending overshadowed weakening overseas demand.

Gross Domestic Product (GDP) expanded 0.1 per cent in Q1 2013 from the previous quarter, government data showed on Friday.

In Q4 2012, the economy shrank by 0.7 per cent over the previous quarter.


A break-up of the data shows the economy's heavy reliance on consumers to fuel growth as the lowest unemployment rate in nearly two decades boosts consumer sentiment.

Consumer spending rose 0.8 per cent in Q1 2013. Consumer confidence is tipped to rise to the highest level in more than five and a half years next month, GfK said.

Exports slumped by 1.8 per cent last quarter while capital investment tumbled 1.5 per cent.

Overseas demand for German goods remains weak amid a recession in the Euro area, Germany's biggest trading partner and a slowdown in emerging markets such as China and India.

A severe winter also weighed on growth last quarter as construction activity was affected, limiting GDP gains.

A pickup in business confidence this month raises optimism over the outlook for the economy. Business confidence in Germany rose for the first time in three months, Ifo Institute said.

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Story first published: Friday, May 24, 2013, 23:33 [IST]
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