German GDP Shows Modest 1st-Quarter Rise

Germany avoided sliding into recession in the first quarter as its economy returned as expected to modest growth, and the euro’s weakness appears ready to fuel an export-led upturn in coming months.

The Federal Statistics Office said Tuesday that gross domestic product grew 0.4% in the first quarter from the previous quarter when it contracted 0.1%. The rise was driven by domestic demand as exports fell.

Two consecutive quarters of contraction would have amounted to a recession, according to the generally accepted definition, but the Finance Ministry said the figures show economic activity was beginning to pick up.

“The government sees its view confirmed that a phase of cyclical weakness can be overcome soon,” it said in a statement.

Year-on-year growth slowed in the first quarter to 0.7% from 2.0% because special factors had boosted the figure for the year-earlier period, the Federal Statistics Office said.

German economic institute Ifo cautioned that the figures show the economy remained weak, but it acknowledged that the euro should boost export demand in coming months.

“The exchange rate of course helps exports, but one shouldn’t forget that import prices will also rise,” Ifo economist Willi Leibfritz said. He predicted GDP growth of about 1.5% for 1999.

The report contributed to a rise in the euro Tuesday, to $1.046 in New York, up from $1.029 Monday.