German growth rebound driven by lively household spending

A construction worker is pictured at the construction site of the new terminal 3 of Frankfurt Airport in Frankfurt, Germany April 29, 2019. REUTERS/Ralph Orlowski

BERLIN (Reuters) - German household spending rose at its strongest pace in eight years, driving a rebound in the first quarter, while a pick up in construction activity and surprisingly solid exports also helped Europe’s largest economy to get back on track.

The Federal Statistics Office on Thursday confirmed preliminary gross domestic product growth of 0.4% quarter-on-quarter and 0.7% year-on-year seasonally adjusted.

Private consumption rose 1.2% on the quarter, which was the biggest increase since 2011, contributing 0.6 percentage points to the expansion.

Investments in construction increased 1.9% on the quarter which resulted in a contribution of 0.2 percentage points.

Despite increased trade tensions and business uncertainty, exports rose more strongly than imports in the first three months of the year which meant that net trade contributed 0.2 percentage points to the overall expansion.

The German economy avoided a technical recession by a whisker at the end of last year after a 0.2% contraction in the third quarter and a stagnation in the fourth.

The growth outlook for the German economy remains clouded, however, by rising trade barriers such as tariffs and business uncertainty linked to Britain’s chaotic departure from the European Union.

The government has slashed its growth forecast to 0.5% this year.

Reporting by Michael Nienaber; Editing by Raissa Kasolowsky