FRANKFURT (Reuters) - German economic growth continued unabated in the first three months of the year and a recent setback in a key sentiment indicator is only likely to impact the next quarter, the Bundesbank said in a regular monthly report on Monday.
Growth continues to be driven by industry, buoyed by a surge in orders in late 2017, even if a recent survey by the Ifo institute pointed to a moderation in business expectations, the central bank said.
“The noticeable decline in the expectation component (of the index) is likely to be reflected in the upcoming quarter,” the Bundesbank said. “In the first quarter, the strong upturn in the German economy should continue.”
Enjoying its best run since the global financial crisis, Germany has been the engine of Europe’s recovery and Ifo figures indicate that growth remains solid, even if some of the euphoria seems to be evaporating.
Expansion is also supported by the labor market and the recent sharp drop in the jobless rate is likely to be a factor of both growth and the lack of a rise in the number of unemployed refugees, the bank said.
But the report noted that bottlenecks are increasingly visible in construction and the sector’s contribution to growth in the quarter is likely to be modest as a result.
Reporting by Balazs Koranyi; Editing by Catherine Evans