Surprise surge in German growth as exports boom

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German economic growth outstripped the UK in the first quarter of this year, helping the country to emerge from recession, official figures showed yesterday.

German economic growth outstripped the UK in the first quarter of this year, helping the country to emerge from recession, official figures showed yesterday.

The German economy surged 1 per cent in the three months of 2005, bolstering the eurozone as Italy, its third-biggest economy, plunged into recession.

Buoyant German exports more than compensated for a further slump in domestic demand, but underlined the fragility of Germany's recovery. The federal statistics office said the improvement "was exclusively based on exports".

Economists cautioned that the unexpectedly strong figure followed a weak six months for Germany so did not necessarily augur well for the rest of the year. In February, the country's unemployment rate hit a post-war record of more than 5 million.

Axel Weber, the president of the Deutsche Bundesbank, said: "The first quarter went well, but the scenario remains that the rest of the year may not go so well."

Gerhard Schröder, the German chancellor, was more optimistic. "With growth of 1 per cent compared with the previous quarter, we are the front-runners of Europe.

"The unusually strong development in exports underscores the high level of international competitiveness of German companies," he told the German newspaper Leipziger Volkszeitung today, adding that there was "every reason to assume that the momentum in growth will continue".

Julian Seetharamdoo, at Capital Economics, said: "There is little in the data to alter our view that growth in 2005 is set to slow compared with 2004."

Italy's economy shrank 0.5 per cent in the first quarter, after contracting by 0.4 per cent in the final quarter of 2004. A fall in Dutch growth of 0.1 per cent also left the Netherlands on the brink of recession.

The European Commission yesterday trimmed its growth expectations for this year to 1.6 per cent from the 2 per cent growth it forecast last month. The eurozone grew 2 per cent last year.

Britain's economic growth slowed to its lowest in more than a year during the first quarter, at 0.6 per cent, while US growth eased to its slowest in two years, at about 0.6 per cent.

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