The Federal Statistics Office reported that year-on-year growth stood at 1.4 per cent. This contradicts pessimistic forecasts earlier this year, which had anticipated a slight downturn following the extremely cold weather in January.
Economic activity in the first quarter was weighed down by a slump in the construction sector, and there was virtually no change in the consumer market. Unemployment fears and increased social security contributions kept private consumption down.
There were, however, signs of a pick-up in the corporate sector, where investment in equipment rose for the second quarter in succession. Business confidence was boosted by the export boom, attributed to a weak mark and rising demand in foreign markets. In comparison with the previous year, exports grew by 6.8 per cent between January and March.
Statistics for March and April orders, published by the Economy Ministry yesterday, confirmed that the upswing was gathering strength. Both domestic and foreign orders grew by an unexpectedly strong 3 per cent in April, while contracts for domestic capital goods increased by 2.1 per cent. Demand for goods made in the east was up by 9 per cent. These are the first indications that growth is no longer relying on exports alone.
Gunter Rexrodt, the Economics Minister, seized on the statistics as evidence that Germany had resumed its competitiveness, and suggested that an improvement in the labour market was just around the corner.
Despite his optimism, however, the latest figures hold out little hope for the 4.2 million unemployed. Due to a 2.9 per cent increase in productivity, more than half a million jobs disappeared in the first quarter. Official statistics on the latest unemployment figures are expected to appear today, but persistent leaks foreshadow another disappointment. Although the unadjusted figure fell in May, seasonally adjusted joblessness in May is expected to be above last year's level.
Nor is the better economic climate likely to help the government meet the Maastricht criteria for monetary union. Even at the official forecast of 2.5 per cent growth this year, the deficit is projected to be up to half a per cent above the permitted limit of 3 per cent.
Despite the latest improvements, most institutes do not expect growth to exceed 2 per cent this year.