German economy grows at highest quarterly pace in two years in Q1 on domestic demand

Germany’s economy recorded the highest quarterly growth in two years in the first quarter of 2016, aided by the mild winter and possibly the leap year. According to German federal statistics office Destatis, the nation’s GDP grew 0.7% q/q, above trend. The quarter-on-quarter comparison indicates that domestic demand mainly drove the economic growth.

All the domestic demand components expanded in the first quarter. In the start of 2016, final consumption expenditure of general government and households grew. Also, capital formation rose. However, the foreign trade contributed negatively to growth as imports surpassed noticeably than exports. On a year-on-year basis, Germany’s price-adjusted GDP grew 1.3% in Q1.

In 2016, private consumption is expected to expand by around 1¾% and is likely to mainly drive the economic growth, noted Nordea Bank in a research report. The German economy is expected to grow but at a slower rate in spite of subdued demand from emerging markets.