The German economy returned to growth in the first quarter as householders spent more freely and construction activity picked up, but the government cautioned that the outlook remained clouded by trade disputes.
Gross domestic product (GDP) rose 0.4pc quarter-on-quarter, Wednesday’s Federal Statistics Office data showed. Year on year it grew a calendar-adjusted 0.7pc. Both preliminary readings were in line with market expectations.
Economy Minister Peter Altmaier told Reuters the figures offered a “first ray of hope” following two quarters without expansion, but it was too early to give the all-clear.
“The international trade disputes are still unresolved. We must do everything possible to find acceptable solutions that enable free trade,” Altmaier said.
The US and China have ramped up their trade conflict, with Beijing this week announcing new tariffs against US imports after Washington ramped up levies on Chinese imports. Both countries are important markets for German exporters, meaning the tariffs are hurting their businesses too.
US President Donald Trump may also this week increase tariffs on European car imports, which would have a disproportionate impact on Germany.
Altmaier, a confidant of conservative Chancellor Angela Merkel, repeated a call to support companies by cutting red tape and taxes. Finance Minister Olaf Scholz, a Social Democrat, has declined to cut corporate taxes.
The Statistic Office said growth was mainly driven by construction and increased household spending. Corporate investments in machinery and equipment also helped, while state spending was slightly negative.
“The trade development sent mixed signals as exports and imports both picked up on the quarter,” the office said, leaving open the question whether net trade had a positive impact on GDP.
The Office will publish more detailed growth data next week which should shed more light on which sectors of the economy contributed to growth and to what extent.
It confirmed that the German economy contracted by 0.2pc in the third quarter of last year and stagnated in the fourth.
Headwinds from abroad suggest any growth rebound this year is likely to be modest.