German economy likely grew around 0.7% q/q in Q1 2016, but to weaken in Q2

German economy has likely fared well and above expectations in the first quarter of this year, based on the data released in recent weeks. The nation’s trade continue to face headwinds, while the heightened uncertainty and market disturbance during the start of 2016 has likely impacted business investment and consumption negatively. Germany’s construction sector, supported by favorable weather, seems to have mainly driven the economic growth, according to Societe Generale.

“We now expect growth to be around 0.7% qoq in Q1 (0.2% before), but we do not expect this surge to continue. Instead, we expect weakness in Q2 with business sentiment still struggling to recover”, added Societe Generale.

Hence, the country’s economic growth is expected to diverge in the first quarter. Meanwhile, the German government presented its medium-term financial plan for 2017-2020 recently. The government anticipates major rise in spending, mainly because of migrant inflows. One of the main reasons for increasing spending is likely due to fall in interest payments on the falling national debt, noted Societe Generale.