German economy shines through Greek euro shadow
BERLIN (Reuters) - Stellar exports powered Germany to surprisingly strong growth of 0.5 percent in the first quarter, cementing hopes that Europe's largest economy can underpin the euro zone, though poor investor sentiment data warned of Berlin's continued vulnerability.
Germany bounced back from a contraction of 0.2 percent in the fourth quarter, comfortably shaking off recession fears and beating even the highest forecast in a Reuters poll of 41 economists. Demand for its high quality goods, particularly from outside Europe, reached a record monthly level in March.
Preliminary data from the statistics office published on Tuesday also showed that growth compared with the same quarter a year earlier accelerated to 1.7 percent from 1.5 percent in the fourth quarter.
The consensus forecast was for growth of 0.1 percent on the quarter and 0.8 percent on the year.
"This is a very strong comeback. The decline in the fourth quarter was not the start of a recession but just an economic dip," said Joerg Kraemer, an economist at Commerzbank.
Analysts praised Germany's "Teflon economy", which has so far evaded the fate of euro zone peers, not only due to its export performance but also helped by healthy domestic consumption in the country of 80 million people.
But they warned Germany could not remain immune to fresh turbulence sweeping through the single-currency bloc as Greek politicians fail to form a government and leaders struggle to agree stimulus measures to temper blistering austerity rules.
"Germany is heading towards a cool-off in the middle of the second quarter. If Europe manages to get a grip on its problems however and German Chancellor Angela Merkel and French President Francois Hollande can renew the Franco-German crisis management, then trust could quickly return," said analyst Christian Schulz at Berenberg bank.
"Germany is faring better than the rest of the euro zone. But I do not believe that it will continue at this speed," said Kramer.
The statistics office said exports mostly drove growth and domestic consumption also gained pace, helping offset a decline in investment.
First-quarter GDP data followed a run of strong economic figures, including industrial orders and record trade figures released last week.
But things have changed since March, reflected in a disappointing sentiment survey also released on Tuesday which showed a sharp decline of analyst and investor morale as political uncertainty devours confidence.
The Mannheim-based ZEW economic think tank's monthly poll of sentiment sank to 10.8 from 23.4 in April, way below a consensus forecast in a Reuters poll of 33 economists for a drop to 19.0.
ZEW said elections in Greece and France had probably contributed to the fall, and economic risks had risen.
"It may have contributed to this month's decline that the outcome of the elections in Greece and France has made it more doubtful that European governments will resolutely fight the sovereign debt crisis," said ZEW in a statement.
The index was based on a survey of 284 analysts and investors and was conducted between April 30 and May 14.
The question of whether Greece will stay in the euro zone particularly weighed, said ZEW economist Michael Schroeder.
"For the time being we do not know what Greek politicians will do, when we will see a new Greek government, what will happen with the consolidation process. All these questions are still open," Schroeder told reporters.
(Reporting by Alexandra Hudson; Editing by Madeline Chambers/Jeremy Gaunt)
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