German Q1 GDP growth likely accelerated, final April HICP inflation to have confirmed flash readings

Germany’s economic growth is likely to have expanded strongly in the first quarter of 2016. The strong growth is expected to have been driven by solid construction and manufacturing production, and consumption. However the German economic activity is expected to slow down in the second quarter, particularly construction that has been impacted by mild weather in the first quarter. Net exports are expected to have again contributed negatively to the GDP growth in Q1.

“The first estimate of Q1 GDP growth is expected to show a strong increase of 0.7% qoq in GDP”, said Societe Generale in a research report.

Meanwhile, Germany’s final HICP inflation for April is expected to have remained unchanged from the flash readings of -0.3% y/y, added Societe Generale. Prices paid for services fell to 0.8% y/y from 1.6%, weighing on the headline inflation. Also, food prices fell markedly last month to 0.5% y/y to 1.3% y/y, also weighing on the headline rate. However, energy component declined at a slower rate.

German core CPI inflation appears to have decelerated to 1% y/y due to subdued inflation in services. But the non-energy industrial goods prices appear to have risen markedly after falling in the prior month. Inflation in Germany is expected to be near zero until the summer and then markedly rebound due to base effects from the energy component, noted Societe Generale.