German economy posts surprise growth

Germany's economy expanded twice as fast as expected in the first three months of this year.

Germany's economy expanded twice as fast as expected in the first three months of this year.

But the 1 per cent surge was solely export-driven and is unlikely to dispel fears of slowdown in Europe and beyond at the moment

The rise in gross domestic product pulled Europe's biggest economy from the brink of recession after a mild contraction in the latter half of 2004, the second in just two years.

Economists are trying to establish whether there is any risk of what they call a "soft patch" turning into a more pronounced downturn globally as oil prices remain high at $50 per barrel or more, hitting confidence and squeezing company profit margins. There are fears things may have got worse since end-March.

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The EU statistics office, Eurostat, publishes an estimate of euro zone GDP for the first quarter at 10 am after the national reports from Germany, Finland, The Netherlands, and in tandem with a report from Italy.

Surveys of business and consumer confidence have pointed to deteriorating morale since the end of the first quarter, while April surveys of corporate purchasing managers suggested slower activity in the service and manufacturing sectors globally, with manufacturers in places like Italy close to recession.