Bundesbank confident Germany can return to growth

Germany, Europe's biggest economy, has gotten off to a somewhat shaky start to 2013, but that will not jeopardise its expected recovery later this year, the Bundesbank said on Monday. "The hesitant start to 2013 has not placed a question-mark over the anticipated rebound in economic activity," the German central bank wrote in its March monthly report. After German gross domestic product (GDP) shrank by 0.6 percent in the last quarter of 2012, industrial orders and output data for January declined unexpectedly, dealing a blow to hopes for a rapid rebound. Nevertheless, confidence and sentiment indicators are continuing to point upwards. The important Ifo business climate index, for example, "rose again in February, with export expectations in particular pointing upwards," the Bundesbank wrote. "Output expectations are similarly pointing to expansion. This is backed up by a strong rise in imports in January, following two unusually weak months. Companies are continuing to hire and consumers remain confident thanks to favourable labour market conditions," the report said. German GDP grew by 0.5 percent in the first quarter of 2012 and then by 0.3 percent in the second quarter and 0.2 percent in the third quarter. With the contraction of 0.6 percent in the fourth quarter, the economy expanded by just 0.7 percent across the whole of 2012, compared with 3.0 percent in 2011. The government is pencilling in growth of 0.4 percent for 2013. But German industry is more optimistic and the DIHK federation of chambers of commerce recently projected growth of 0.7 percent given brighter export prospects and a stabilisation in corporate investment and hiring.