German economic growth slows sharply in Q1, likely to expand 2.5 pct in 2018

German economic growth decelerated unexpectedly in the first quarter of this year on a sequential basis. The GDP growth slowed down sharply by 0.6 percent to 0.3 percent, as compared with consensus expectations of 0.4 percent. There had been speculation in advance about negative one-off effects. The Federal Statistics Office indicated that construction investments in particular “increased strongly” in the March quarter.

The German economic growth was mainly dampened by foreign trade, according to the Wiesbaden statisticians. This underpins the assessment that the German economy is suffering from the strong euro, which has strengthened by 9 percent in the last 12 months and made the goods produced in Germany more expensive from the perspective of foreign customers, noted Commerzbank in a research report.

Currently, the rise in oil prices might have an additional negative effect, as it would dampen the purchasing power of private households by about 0.7 percent in 2018, when it stood at USD 75 by the end of 2017.

“We have taken all these risks into account by lowering our growth forecast for 2018 from 2.5 percent to 2.0 percent since the end of last year. After the unexpectedly weak figures for the first quarter, even this forecast is subject to downside risks. Based on past experience, we expect the dip in growth to continue until the turn of the year”, added Commerzbank.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Euro was bearish at -97.349, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 147.142. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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