The German economy grew by a slower-than-expected 0.4 percent in the first three months of 2006, puncturing hopes for a strong rebound in Europe's largest economy.
The quarter-on-quarter expansion, which confirmed the figure reported by Reuters on Wednesday, fell short of the 0.6 percent forecast by economists polled by Reuters last week.
"This is a weak start to the year," said Norbert Braems at Sal. Oppenheim. "We won't be able to achieve more than 2 percent growth this year. We would need a substantial acceleration throughout the year. We keep our forecast at 1.8 percent."
Growth in the final three months of last year was flat, the Federal Statistics Office said, leaving its previously reported figure unrevised. It cited positive impulses from domestic and foreign activity as driving growth in the first quarter.
"As well as foreign trade, above all private consumption and equipment investment contributed to the economic upswing at the beginning of 2006," the office said in a statement.
The growth reading eased some analysts' concerns about the economy's performance after figures on Tuesday showed industrial output suffered its biggest monthly drop in nearly six years in March as abnormally poor weather dented constructive activity.
"A week ago we would have been disappointed," said Sebastian Wanke at Dekabank. "But after the poor industrial production and trade data, we're happy with a figure of 0.4 percent. That is a good start to the year, even if it falls short of expectations."
Germany's trade surplus unexpectedly narrowed in March.
"I had originally hoped for something more," BHF-Bank economist Gerd Hassel said of the growth figures. "But this is nevertheless a robust start for the year," he added, forecasting growth of at least 1.5 percent for the full year.
Many economists had forecast the economy could grow by 2 percent this year after strong readings from sentiment indicators, including the Ifo institute's gauge of corporate optimism, which hit a 15-year-high in April.
The slower-than-expected first quarter performance will provide little solace to Chancellor Angela Merkel's coalition government, which is looking to economic growth to help reduce high unemployment.
It may also dampen the outlook for the eurozone.
The government is not changing its forecast for German growth of 1.6 percent this year, junior Economy Minister Hartmut Schauerte told Reuters after the release of the German data.
The Statistics Office revised up its figure for annual growth in 2005 to 1.0 percent from 0.9 percent previously.
The Office did not give a breakdown of contributions to first quarter expansion but separate figures it published on Wednesday showed Germany's trade surplus narrowed in March as exports failed to keep pace with imports.
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