Germany to recover after weak start to 2013 -Bundesbank

FRANKFURT, March 18 Mon Mar 18, 2013 7:00am EDT

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FRANKFURT, March 18 (Reuters) - A disappointing start to the year for the German economy will not derail recovery of Europe's largest economy, the Bundesbank said in a monthly report on Monday.

German industrial output showed zero growth in January while industry orders unexpectedly fell, deepening concerns about the strength of the rebound from a weak fourth quarter, which saw gross domestic product (GDP) contract by 0.6 percent

But the German central bank said in its March report that the economy was still on track to recover, pointing to improved expectations for exports and production.

"The German economy's start to the year missed expectations that had been driven by a calmer situation on financial markets and improved sentiment among companies," the Bundesbank said.

"The hesitant start to the year 2013 does not put into question the prospect of a pick-up of economic activity."

Bundesbank officials last week stuck by a forecast for 0.4 percent growth this year, having said previously the economy was likely to stagnate in the first quarter.

Most economists still see the country escaping a recession, defined as two consecutive quarters of contraction, by growing weakly in the first quarter before regaining momentum.

Recent forward-looking sentiment indicators have shown German companies, investors and consumers becoming more optimistic, while unemployment dropped in February.

The Mannheim-based ZEW think tank's monthly poll of investor sentiment on the current state of the German economy and the business climate index of the Munich-based Ifo think tank are both expected to rise in March.

They are due on Tuesday and Friday respectively.

The Bundesbank also said that the appreciation of the euro against major currency at the end of last year was among other reasons responsible for a fall in import prices in January.

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