* Investment, consumers help double growth quarter on
* Growth boosted only by domestic factors, exports a drag
* Ifo business morale slows, signals slower expansion ahead
* Mild weather helped in Q1, Germany is euro zone growth
By Annika Breidthardt
BERLIN, May 23 Germany's economy grew at its
fastest rate in three years in the first quarter, driven by
domestic factors, while a leading indicator of sentiment
signalled that expansion in Europe's largest economy is set to
Strong investment and more freely-spending consumers drove
the German economy to a seasonally-adjusted 0.8 percent
quarterly growth rate, according to the Federal Statistics
Office. That was twice the rate in the final quarter of last
year and meant Germany was the growth engine of the euro zone's
9.5 trillion euro economy.
Growth was helped by milder than usual winter weather which
meant the usual spring upturn was brought forward. Exports, the
traditional backbone of the German economy, were a drag on
"Positive impetus came exclusively from within the country
in a quarter-on-quarter comparison," the Statistics Office said.
Economists and the government expect growth to slow after
the strong first quarter. The government sees the German economy
expanding by 1.8 percent this year, down from the year-on-year
growth rate of 2.5 percent in the first quarter.
Germany's leading indicator of business morale, the Ifo
index, on Friday also pointed to a reduced growth rate, falling
in May to the lowest level so far this year and missing
"A lull was seen in the German economy in May," Ifo
President Hans-Werner Sinn said after business sentiment dropped
to 110.4 from 111.2 in April.
The drop, which Ifo economist Klaus Wohlrabe said was in
part due to the impact of the Ukraine crisis, sent the euro to
its lowest level in three months.
A LEAGUE OF ITS OWN
In the Ifo survey, assessments of current business and
expectations of future business developments both fell.
"Today's data sent two messages: for the time being, the
German economy is still playing in a league of its own, at least
in the euro zone," said Carsten Brzeski of ING, adding that at
the same time no economy "is invincible forever."
Ifo said expectations in the car sector had taken off, in
line with news this month from the world's biggest luxury
carmaker BMW AG, which said investment in new models
would help it achieve record sales this year.
The firm is spending heavily in a bid to stay ahead of
In the first quarter, German plant and equipment investment
grew by 3.3 percent, the strongest level in 3-1/2 years, while
construction investment, up 3.6 percent, was the strongest on
the quarter in three years.
Domestic demand added 1.7 percentage points to GDP in the
first quarter, while foreign trade subtracted 0.9 percentage
points. Private consumption added 0.4 percentage points.
But as other euro zone countries such as Spain, which had to
take strong medicine to improve competitiveness, are starting to
see benefits, some economists expected trade to help Germany
again as well.
"We expect that exports will gain speed too. The rest of the
euro zone is not doing so badly anymore," said Holger Sandte of
Nordea. His bank would raise its GDP forecast for 2014 to 2.0
percent from 1.8 percent, he added.
(Reporting by Annika Breidthardt, Michelle Martin and Stephen
Brown; Editing by Stephen Brown and John Stonestreet)