A pickup in the German economy should gather pace in coming months and there are signs household spending strengthened at the start of the year, Bundesbank President Axel Weber said on Saturday.
"Germany is now in the second phase of a recovery process. Nothing seems to be standing in the way of a strengthening of the upswing," Weber told a news conference during a meeting of European Union finance ministers and central bank governors in Vienna.
"We are seeing a broadening of the production base, especially among producers of capital goods which is in addition to the already strong performance of exports," he added.
Weber said a recent surge in confidence among companies in Europe's biggest economy probably heralded firm rates of growth in coming months.
But he cautioned that consumer spending remained a weak spot, especially due to rising energy prices and the resulting reduction in shoppers' spending power.
"However, the positive data in January and February on retail sales suggest there were some positive impulses from household consumption at the beginning of 2006," said Weber, who is also a member of the European Central Bank's rate-setting governing council. "There is nothing standing in the way of a continuation and deepening of the upswing in growth, on the contrary."
Weber said the main downside risks to the economic recovery remained the possibility of a fresh, inflation-boosting gain in oil prices - US crude oil is back within sight of the $70 per barrel level - and global economic imbalances. "There is a risk that another gain in oil prices could have an unexpected inflationary effect," Weber said. "As central bankers we will do everything we can to do our job of countering inflationary dangers."
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