The German economy skirted a recession at the start of the year, growing more than expected thanks to the construction sector and exports, preliminary data showed on Tuesday (Apr 30).

The economy grew slightly in the first quarter, with gross domestic product rising 0.2 per cent on the previous three-month period in adjusted terms.

Analysts polled by Reuters had forecast a 0.1 per cent increase.

The higher than expected figure does not change the view of shared by economists that structural weaknesses will limit Germany’s recovery.

“Instead of an upturn, only narrow-gauge growth is in sight,” said Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe Privatbank.

Tuesday’s GDP data follows stronger sentiment indicators and a pick-up in activity since the start of the year, noted Carsten Brzeski, global head of macro at ING.

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“Besides the potential cyclical headwinds, Germany’s well-known structural weaknesses will not disappear overnight and will limit the pace of any rebound this year,” Brzeski said.

The statistics office revised the data for the last quarter of last year to show a 0.5 per cent contraction, rather than the fall of 0.3 per cent that was previously reported.

The German economy, Europe’s biggest, was the weakest among its large eurozone peers last year, as high energy costs, feeble global orders and record high interest rates took their toll.

Although inflation is expected to ease this year, growth is forecast to remain relatively weak. Last week the German government raised its economic growth forecast for this year to 0.3 per cent, from 0.2 per cent previously.

Private consumption is expected to contribute growth momentum as real wages are expected to rise in a resilient labour market.

Data from the statistics office showed on Tuesday that German retail sales rose more than expected in March, up 1.8 per cent on the month, pointing to a recovery in consumption at the end of the quarter and boding well for the overall economy.

However, in the first quarter as a whole, there was a decline in household consumption, the statistics office said in its GDP press release, without giving further details. REUTERS