No doubt remaining: German domestic demand is resilient

German activity has accelerated in the first quarter of the year on the back of a strong domestic economy.

German GDP rose by 0.4% quarter-on-quarter in Q1, accelerating from a flat figure in Q4.

The strong Q1 GDP growth is good news and confirms our long-held view that domestic demand remains resilient despite many external headwinds.

The signal given by other data (factory orders, surveys) suggests that some negative payback is likely in Q2.

The prospect of higher German growth (on average) in H2, driven by some reversal of weak global trade growth is in jeopardy following the intensification of the trade dispute between the US and China.

Even if confined to the US and China, Germany would be impacted through uncertainty and trade spill overs.

Of major importance is potential auto tariffs. Trump’s decision on the matter is due by 18 May, but he has many options for delaying his final decision.

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