The German economy down slightly in the second quarter: the Bundesbank

BERLIN (Reuters) – The Bundesbank said on Monday that Germany's economic output would fall back slightly in the second quarter, as the one-off effects that underpinned a first-quarter expansion faded.

Europe's largest economy grew 0.4% from January to March, driven by higher household spending and a buoyant construction sector.

"The German economy is expected to contract slightly in the spring," the central bank said in its monthly report. "The special effects that have contributed to a noticeable increase in gross domestic product in the first quarter are expiring or are reversing."

The German economy is facing headwinds related to trade disputes, uncertainty over Britain's decision to leave the European Union, and a slowdown in the global economy, weighing on its dependent manufacturing sector exports.

Earlier this month, the European Central Bank ruled out the possibility of raising interest rates in the coming year and even opened up the possibility of reducing or buying more bonds, risk factors such as the global trade war and Brexit, leading to a slowdown in the euro area economy.

The Bundesbank said that activity in the construction sector in Germany was cooling off after the mild winter weather that boosted activity in the first quarter.

The weakness of the manufacturing sector continues to weigh on the economy, which is building momentum on a consumption-based cycle, supported by record-high unemployment, low interest rates and rising consumer prices. wages.

"The driving forces behind the strong economic sectors of the national economy remain fundamentally intact," the Bundesbank said. "The dichotomy in the economy will continue."