German economic growth speeds up in first quarter

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German economy defied increased political risks and picked up speed in the first quarter of 2017 as companies invested more, consumers and the state continued to spend and exports soared despite the threat of rising protectionism.

Europe’s biggest economy grew by 0.6% in the quarter from the quarter before, when it expanded 0.4%, the Federal Statistics Office said yesterday.

That was the strongest quarterly growth rate since the first quarter of 2016, when the economy grew 0.7%. It was in line with the consensus forecast in a Reuters poll.

On the year, gross domestic product grew 1.7% seasonally unadjusted, also in line with the consensus forecast.

The figures are the latest in a batch of solid data that are likely to help Chancellor Angela Merkel and her centre-right CDU/ CSU bloc to burnish their economic credentials before a Sept 24 federal election, when she will seek a fourth term.

“A boom without end in Germany ... and despite all the risks,” Bankhaus Lampe analyst Alexander Krueger said, calling it a good sign that the upswing was based on a broad foundation.

“However, it should be noted that the economy would be humming less without the support of interest rates, which are too low for Germany,” he added, in reference to the European Central Bank’s ultra-loose monetary policy.

The Federal Statistics Office said investments in buildings and equipment grew

strongly, partly due to a mild winter, while households and state authorities increased their expenditures slightly at the beginning of the year.

Trade also gained momentum and supported growth as exports grew more than imports, it said.

“The economy continues to benefit from a doping cocktail of low interest rates, favourable oil prices and an export-boosting exchange rate,” DIHK managing director Martin Wansleben said.

He added that numerous risks, such as US President Donald Trump’s protectionist threats and the uncertain outcome of Brexit negotiations, had not slowed growth so far.

“Companies are increasing their spending on machinery and equipment in order

to seize the opportunities of digitisation, remain internationally competitive and drive innovation.”

The data also underlines the strength of the German economy compared with its peers.

The French economy, the second-largest in the euro zone, grew 0.3% in the first quarter, slowing from 0.5% in the final quarter of 2016, preliminary data showed.

For Italy, the third-biggest economy in the 19-member bloc, the national central bank has projected quarterly growth of 0.2%. Preliminary data are due next Tuesday.

The Spanish economy powered ahead, however, with a stronger-than-expected growth rate of 0.8% in the first quarter, above the euro zone average of 0.5%.