By Nina Adam
FRANKFURT--German economic growth slowed in the first quarter
and companies scaled back their business expectations in May,
according to data published Friday, clouding the outlook for
Europe's largest economy.
Doubts about the strength of the economy had already been
building in recent weeks, because of weakness in some of Germany's
key trading partners --such as the U.S., China and Russia--as well
as sluggish investment spending and production.
The Ifo think tank said Friday that its business climate index
slipped for the first time in seven months, to 108.5 in May from
108.6 in April, as manufacturers lowered their export prospects.
But the outcome was better than economists had predicted and more
upbeat than the results of an earlier survey of purchasing
managers.
"The German economy remains on track," Ifo President Hans-Werner
Sinn said. Ifo predicts gross domestic product growth of 2.1% in
2015 and 1.8% in 2016. Every month, Ifo asks about 7,000 companies
in manufacturing, construction, wholesaling and retailing about
their business expectations for the next six months and their
assessment of the current situation.
"All in all, the Ifo survey points to a robust business
environment so far in the second quarter", said Barclays economist
Thomas Harjes. He expects the economy to keep its pace of economic
expansion in the second quarter.
Europe's largest economy grew by a quarterly rate 0.3% in the
first quarter, the federal statics office, Destatis, said Friday.
This was in line with an earlier estimate by Destatis, but down
from 0.7% growth in the fourth quarter.
Domestic demand propelled activity in the first quarter, as both
private consumption and investment spending increased. But sluggish
exports and falling inventories meant growth fell short of an
extraordinarily strong fourth quarter.
Household consumption was up 0.6% as consumers took heart from a
buoyant labor market, rising wages and lower energy prices.
Government consumption climbed 0.7%. There were also more signs of
resurging investment activity. Equipment spending jumped 1.5% on
the quarter and construction investment was up 1.7%.
Write to Nina Adam at nina.adam@wsj.com