Bundesbank Casts Doubt on German First-Quarter Economic Recovery

The Bundesbank said sluggish industrial production and cold winter weather may have delayed Germany’s economic recovery, which it had forecast for the first quarter.

“While the industrial sector didn’t provide any growth impulses in the first quarter of 2013, services should have expanded,” the Frankfurt-based institution said in its monthly report today. “Against this backdrop, growth seems possible. But that assumes that the impact of especially cold winter weather, which was apparent in the construction sector, remained contained within tight limits.”

The Bundesbank predicted in January that the German economy, Europe’s largest, would return to growth in the first quarter and avoid recession after it contracted 0.6 percent in the final three months of 2012. Since then, economic data have been weaker than forecast, partly hampered by a long winter. Last month was the coldest March in 25 years and the fifth-coldest since 1881, according to German meteorological service Deutscher Wetterdienst.

Industrial production fell in January, exports plunged in February and business confidence unexpectedly declined from a 10-month high in March on renewed tensions in the euro area.

Still, the International Monetary Fund lifted Germany’s 2013 growth forecast to 0.6 percent from 0.5 percent and predicted expansion of 1.5 percent in 2014. By contrast the euro-area economy, Germany’s largest export market, will shrink 0.3 percent this year before growing 1.1 percent next year, according to IMF projections published last week.

“Relatively positive sentiment, continuing employment growth and increasing demand for investment goods suggest that the upward trend of the German economy continues in the second quarter,” the Bundesbank said. “Catch-up effects can play a role if there were any weather-related constraints in the first quarter.”

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