Germany Logs Stronger Growth On Tariff Threats

(RTTNews) - The German economy grew at a stronger-than-estimated pace in the first quarter as higher tariff threats by the U.S. administration led to the frontloading of orders for the country's goods, lifting exports and industrial production.

Gross domestic product grew 0.4 percent, which was double the initial estimate of 0.2 percent, a detailed report from Destatis revealed on Friday. This followed a 0.2 percent contraction in the fourth quarter.

"Growth was slightly higher than predicted in the first estimate due to the surprisingly good economic development seen in March," Federal Statistical Office President Ruth Brand said.

"In particular, manufacturing output and exports registered stronger growth than initially assumed," Brand added.

"The German economy had its best quarterly performance since the third quarter of 2022, and the reason for it seems to be Donald Trump," ING economist Carsten Brzeski said.

Even if the first quarter performance is clearly the result of one-offs and does not look sustainable, it indicates that after the recent downgrading of growth forecasts for this year, the next revision is likely to be to the upside, the economist noted.

Calendar-adjusted GDP remained flat on a yearly basis after easing 0.2 percent in the fourth quarter. The first quarter GDP was revised up from the previous estimate of 0.2 percent fall.

On a price-adjusted basis, GDP shrank 0.2 percent compared to the previous estimate of 0.4 percent fall.

Household consumption grew 0.5 percent from a quarter, while government spending fell 0.3 percent. Overall gross fixed capital formation rose 0.2 percent from a quarter ago.

Fixed capital formation in construction increased 0.5 percent and in machinery and equipment gained 0.7 percent, representing the second consecutive increase in both cases. Overall, gross fixed capital formation increased 0.9 percent.

Driven by higher demand for pharmaceutical products and automobiles, total exports climbed 3.2 percent. Destatis said anticipatory effects amid concerns over a brewing trade war with the US are likely to have contributed to the positive development.

Although imports grew 1.1 percent sequentially, the gain was weaker than that in exports.