German full-year economic growth likely to slightly weaken over rest of this year, to hit 1.6 pct: Commerzbank

The German economy is expected to reach its full-year economic growth at 1.6 percent, rather at a slower pace. However, consumption should continue to provide underlying support for GDP growth. But the first quarter was also boosted by strong exports, particularly to Asia. However, the difficulties facing the Chinese economy are likely to emerge again soon. Germany will not grow quite as rapidly over the rest of the year.

German GDP adjusted for seasonal and calendar effects grew by 0.6 percent in the first quarter, broadly in line with expectations (consensus: 0.6 percent; Commerzbank: 0.7 percent). According to the Federal Statistical Office, the robust growth was attributable to strong investment and exports; the Office will release detailed figures on May 23.

The fairly high growth evident for some time has been mainly driven by consumption. This should continue to be the case because employment continues to reach record levels and the era of very low wage settlements is long over.

"The underlying growth in the German economy is likely to remain high, particularly since there are no indications of any strong upward movement in ECB interest rates which could slow the overall pace again. The first quarter also benefited from growth in exports, while unusually mild weather conditions boosted construction activity," Commerzbank commented in its latest research report.