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German economy expanded at robust rate in Q1 2007; GDP rose by 0.5%

De Statis, the German Federal Statistical Office reported today that the upward trend of the German economy continued in the Q1 of 2007 but at a slightly slower pace but above expectations: The GDP rose by 0.5% in the Q1 of 2007 on the Q4 of 2006, on a seasonally adjusted basis.

The GDP measures the value of the economic performance within the domestic territory. The economic performance in the Q4 of 2006 grew even somewhat more strongly (+1.0%) than previously reported. As further reported by the Federal Statistical Office, the GDP was up 3.3% in the Q1 of 2007 compared with a year earlier. When calendar adjusted – in the reference quarter there was a good half a working day less available than in the Q1 of 2006 – the GDP increase was even 3.6%.

In the Q1 of 2007, economic growth was based especially on capital formation, which continued its dynamic trend. Net exports, too, contributed to growth, though only in a year-on-year comparison. However, final consumption expenditure of households had a clear downward effect on economic growth, which was due especially to the VAT rise from 16% to 19% at the beginning of 2007. The economic performance in the Q1 of 2007 was achieved by 39.0 million persons in employment, which was an increase of 569,000 persons or 1.5% on a year earlier.

In addition to the first calculation of data for the Q1 of 2007, the results published so far for the year and the four quarters of 2006 have been checked and revised where necessary. Such continuous revisions are carried out routinely to integrate newly available statistical information as early as possible and to avoid breaks in the time series. The recalculations resulted in rates of GDP change which for the second, third and Q4s of 2006 were by up to 0.2%age points higher than the provisional results. The annual result was corrected upwards by 0.1 percentage points.

Those upward corrections were mainly due to better results for manufacturing and construction as well as for capital formation in construction. The German Government last month revised its economic growth forecast for this year to 2.3% from 1.7%, saying consumer spending and business investment will continue to sustain the economy that is the biggest in the Eurozone and accounts for about 30% of the area's economic activity. The German economy expanded 2.8% last year, revised up from 2.7%. (