MW: Consumption to help German economy: Bundesbank
FRANKFURT--The German economy is expected to continue to grow on the back of consumption, the country's central bank said Monday, less than a week after the country recorded sluggish growth in the first quarter.
"The dent in the global economy held back exports, while imports strongly increased" the Deutsche Bundesbank said in its monthly bulletin Monday.
Last week Germany's statistics office reported that Europe's largest economy expanded by only 0.3% in quarterly terms in the first quarter, disappointing economists' expectations for stronger growth.
Looking ahead, the central bank said the German economy "will probably expand further in coming months" on the back of consumers.
Turning to industry, the bank said that while cyclical progress remains in place, weak orders figures early in the year suggest that German industry should move for now only at a "sluggish" pace. Still, a strengthening world economy and the low value of the euro should open up export chances for German firms outside of the single-currency bloc, it said.
Experts were disappointed with Germany's preliminary growth figure last week, with economists polled by The Wall Street Journal expecting a 0.5% expansion in quarterly terms in the first quarter.
The latest economic indicators point to "a continuation of the upswing at a moderate pace", the German economics ministry said last week following the release of the GDP figures. It expects the economy to grow 1.8% both this year and next.
In a separate article, the Bundesbank said that thus far the introduction of a minimum wage in Germany, which started at the beginning of this year, has only had a small upward effect on consumer prices, even though in individual industries there have been clear price rises due to the minimum wage. "The effects on the consumer price index as a whole should however remain limited."
The bank also said that about one-third of services included in the consumer-price basket were significantly affected by the higher minimum wage.
"In these sectors was recorded a slightly above-average price rise in the first months of the year that added about 0.1 percentage points to total CPI," the bank said.
However, the bank suggested that the longer-term impact was likely to be more pronounced. The "price adjustment effect is however probably not yet completed" and that the "full effect" on prices would probably end up somewhat higher, it said.
