"The somewhat disappointing first-quarter result was due mainly to the cold weather and the sensitivity of companies to developments in the rest of Europe"
-Gerd Hassel, an economist at BHF Bank AG
The German economy returned to growth in the first three months of this year; however, the growth was hampered by declines in construction activity and investment due to weak domestic demand, official figures showed Friday. The nation's gross domestic product expanded 0.1% from the previous quarter, but contracted 1.4% compared with a year earlier. As German economic output shrank in the prior quarter, the latest data shows that the economy narrowly avoided falling into a recession. The report also showed that construction dropped 2.1% from the fourth quarter, while capital investment tumbled 1.5%. The German central bank predicts the economy to grow 0.4% this year and accelerate to 1.9% in 2014.
In a separate report the Ifo institute's said its gauge of economic health climbed to 105.7 from 104.4 in April, posting the first gain since February. In the meantime, a measure of executives' expectations remained unchanged at 101.6, while a measure of current business conditions improved to 110 from 107.3. Germany is still emerging as Europe's powerhouse and despite the fact risks stemming from Europe's debt crisis persists; the economy is expected to pick up. Moreover, factory orders surged for a second month in March and exports increased as well highlighting bright prospects for the Germany.
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