Germany growth to rise by just 0.5pc

The German Economy Ministry kept its 2014 forecast for solid growth of 1.6 per cent and said it was upbeat as the global economy begins to regain traction and crisis-stricken eurozone states make progress with their reforms.

“There is every reason to look to the future with optimism. The German economy is picking up again and is successfully leaving an economic weak phase behind it,” German Economy Minister Philipp Roesler said.

Europe’s economic powerhouse lost momentum in late 2012 after putting in a strong performance during the first two years of the eurozone crisis. Growth slowed to 0.7 per cent last year and the economy contracted by 0.6 per cent in the fourth quarter as firms postponed investments and foreign trade weakened.

Economists expect the German economy to avoid recession by growing around 0.3 per cent in the first quarter, though a drop in business sentiment and a decline in private sector activity suggest it may be heading for another contraction in the second quarter.

The ministry said firms would spend 2.2 per cent less in equipment this year than in 2012, revising down a January forecast for 1.3 per cent less investment due to a sharp fall last year.

But it said investment activity was emerging from a trough, with a backlog easing, and would increase by some 3 per cent on the year in the fourth quarter.