Germany creeps back to growth

In the first quarter of this year, the German economy grew by 0.1 percent as the recovery was only slowly picking up steam, the country's Federal Statistics Office, Destatis, announced Wednesday.

The slight expansion followed a contraction in economic output in the final quarter of 2012, which was further revised downward by Destatis from 0.6 percent to 0.7 percent.

"The extreme winter weather played a role in this weak growth," Destatis added in a statement.

Even though Germany was able to avoid a technical recession, defined as two consecutive quarters of contraction, the figure for the first quarter is less than expected by most economists.

Describing the growth figure as a huge disappointment, DEKABank analyst Andreas Scheuerle told Reuters news agency that current growth predictions of 0.6 percent in 2013 needed to be revised down to just 0.4 percent on the basis of the first quarter.

He attributed the slow recovery to business reluctance to invest in capital goods in view of the recession in the eurozone and weaker-than-expected demand from emerging market economies.

However, ING economist Carsten Brezeski is more optimistic. Industry was gaining pace as order books were starting to fill again, he told the same news agency. Moreover, German domestic demand bolstered by a strong labor market and wage increases would become a reliable driver of higher growth in the second half of 2013.

The German economy, which is Europe's largest, is still faring better than that of France. Between January and March, French economic output dropped 0.2 percent, the country's Statistics office, Insee, said Wednesday. Following shrinking output in the final quarter of 2012, this means France has slipped back into its second recession within four years.

uhe/hc (Reuters, dpa, AFP)