German central bank sees maintained economic momentum despite slow Q1

BERLIN, April 23 (Xinhua) -- The prospects for German growth in 2018 remain rosy despite a relatively weak performance during the first three months of the year (Q1), the monthly report of the German Central Bank (Bundesbank) found on Monday.

The Frankfurt-based institution noted that industrial production fell sharply in February. "Strikes in the metal- and electronics industry, as well as an unusually-severe flu season are likely to have played a role with regards to low production in February," researchers at the Central Bank explained.

Despite poor growth in Q1, however, the forecast for industrial products and construction firms on the basis of outstanding orders remained "very good", according to the Bundesbank.

"The economic boom is still ongoing, even if the growth rate for gross domestic product (GDP) is likely to be noticeably lower in the first quarter compared to last year," the monthly report read.

The Federal Statistical Office is scheduled to release more detailed Q1 figures in early May. In the meanwhile, the closely-watched Markit Purchasing Index for German industrial- and service sector firms rose surprisingly in April by 0.2 points to 55.3 points.

"The dip of February and March has thus been overcome," Markit economist Phil Smith said. Markit chiefly attributed the circumstance of only modest growth in new orders to the recent appreciation of the Euro.

Additionally, several industry bodies expressed confidence about the future development of their businesses at the opening of the Hannover Trade Fair on Monday.

"In the ninth year of consecutive growth the economy still presents itself in a robust shape," Dieter Kempf, president of the Federation of German Industries (BDI), told the press. The BDI predicted a GDP growth of 2.25 percent for 2018, the highest annual rate of expansion measured since 2011.

OBSTACLES, RISKS

Nevertheless, Kempf warned that some companies represented by the BDI were increasingly "burdened by domestic obstacles to growth," including a scarcity of skilled workers, slow internet speed and insufficient incentives for private investment.

Speaking at the Hamburg Trade Fair as well, Carl Martin Welcker, the president of the German Mechanical Engineering Industry Association(VDMA), highlighted the high number of outstanding orders in his industry as a sign of its strength. Welcker said that he expected more "broad-based growth" in exports which already accounted for more than three-quarters of German engineering firms' sales.

Welcker also highlighted, however, that the risk of escalating trade conflicts sparked by U.S. President Donald Trump's protective policies constituted a "Damocles sword' hanging over the head of German engineers which could not yet be quantified.

Similarly, the German electronics industry cautioned against the "incalculable risk" of a trade conflict whilst maintaining that it was in good health. Michael Ziesemer, president of the Central Association of the Electrical Engineering and Electronic Industries (ZVEI), said that sectoral "real productivity growth of three percent" was a realistic prognosis for 2018. Enditem