German economy returns to modest growth

Wednesday 15 May 2013 11.22
German economy inched 0.1% higher in first quarter of 2013
German economy inched 0.1% higher in first quarter of 2013

The German economy eked out a return to minimal growth in an unusually cold first quarter - a performance that was enough to keep Europe's biggest economy out of recession.

The economy grew by 0.1% in the January to March quarter compared with the previous three-month period, Germany's Federal Statistical Office said today.

That followed a 0.7% in last year's fourth quarter, a figure that was revised downward from the initial reading of 0.6%.

Extremely cold weather that dragged on until the end of March was one factor in the feeble growth figure, the statistical office said.

Winter conditions typically hurt industries such as construction and, between January and March, "growth was based almost only on demand by households," the office said.

The German economy is in better shape than many others in the 17-nation euro area. New figures today show that the euro zone economy contracted for the sixth quarter in a row at the start of this year.

Recent German economic indicators have shown a mixed picture but industrial orders and production data have been robust. The country had been expected to avoid a recession, technically defined as two quarters of negative growth in a row. 

Germany's unemployment rate of 7.1% in April compares with figures well into the double digits elsewhere in the euro zone. And the economy's relative health has fueled demands for substantial pay increases in several sectors.

The IG Metall union secured a solid raise for some 3.7 million workers in the key industrial sector, a deal that heads off the threat of strikes. Under the deal reached by negotiators in Bavaria, which is expected to be extended to the rest of the country, workers will get a 3.4% raise in July followed by another 2.2% next May. The agreement runs until the end of next year.

IG Metall initially sought a raise of 5.5% this year alone, arguing that companies in Germany could afford it and that it would bolster private spending. But union chairman Berthold Huber said that employees "will get a fair and appropriate share of economic developments" under the deal now reached.