May 24, 2012 / 6:06 AM / 8 years ago

German economy shrugs off recession fears in first quarter

BERLIN (Reuters) - The German economy grew by 0.5 percent in the first quarter on a bounceback in exports, confirming the strength of Europe’s largest economy so far but also sounding a warning about potential vulnerability to further euro zone turmoil.

The seasonally adjusted growth figures, which confirmed an earlier flash estimate, showed Germany comfortably shrugged off recession fears after contracting by 0.2 percent late last year.

Exports rose 1.7 percent on the quarter after falling 1.5 percent in the final three months of 2011, while private consumption also rose by 0.4 percent after a 0.2 percent contraction in the fourth quarter last year.

Germany’s economy has powered ahead of its peers after recovering swiftly from the 2008/09 financial crisis and has consistently brushed off debt worries plaguing peripheral euro zone countries and spreading through the bloc.

It slipped only in the final quarter of last year, when economic woes in the currency bloc stifled demand and weakened private consumption at home.

“While the euro zone is still searching for growth, Germany has it,” said Carsten Brzeski, economist at ING in Brussels. “

“The drop in inventories, however, was a clear warning signal for the growth in the coming quarters, reflecting weakening new orders,” he added.

A drop in inventories deducted 0.4 percentage points from gross domestic product (GDP) growth.

Sentiment indicators point to clouds on the horizon. Ifo business sentiment due out at 4.00 a.m. EDT is expected to fall, ending a run of six consecutive gains.

Data last week already showed investor sentiment falling sharply in May, ending a run of strong data for the economy as political uncertainty takes its toll on confidence.

Reporting by Annika Breidthardt, Sarah Marsh and Madeline Chambers; editing by Madeline Chambers

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