The German economy expanded at its strongest pace in 2 years in the first quarter of 2016, driven mainly by domestic demand, official data showed on Friday.
Compared with the final quarter of 2015, Germany's gross domestic product (GDP) grew by 0.7 percent in the first quarter of 2016, said German federal statistics office Destatis. It was the strongest growth since the start of 2014 and more than doubled the growth of 0.3 percent during the last three months of 2015.
According to Destatis, the growth was mainly driven by private consumption and government spending. Investment in equipment and construction also made positive contribution. Foreign trade, Germany's traditional driving engine, had a slight downward effect on the growth as imports increased more than exports, Destatis said.
"Today's data are another sign of Germany's economic strength," said Carsten Brzeski, chief economist at ING DiBa bank. Previously, economists had expected the economy to grow by up to 0.6 percent. However, analysts remained cautious about the outlook of Germany's economic growth in coming months.
Dirk Schlotboeller, economist at the Association of German Chambers of Commerce and Industry (DIHK), warned that current favorable factors supporting the growth, including cheap oil prices, governments spending on integrating refugees and the wild weather, were not sustainable.
"One thing is clear: so many favorable factors are not likely to come together again so quickly," he said. On Friday, the German Federal Economy Ministry said the economic growth is likely to slowdown in the second quarter, "because the usual spring recovery is expected to be weaker due to the mild weather in the first quarter."
The government forecast the economy to grow by 1.7 percent over the whole year of 2016. ING DiBa's Brzeski said "complacency" is the current biggest risk for the German economy with the German government "reluctant to follow up on international advice to implement structural reforms."
Earlier this week, the International Monetary Fund urged Germany to accelerate structural reforms on its labor market and to boost both public and private investment in order to "revitalize potential growth."
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