Germany’s first-quarter GDP witnessed a modest recovery, with a 0.2% quarter-on-quarter expansion, bouncing back from a 0.5% contraction in the preceding quarter. The rebound aligned with preliminary estimates and market expectations.  

The upturn was primarily driven by a sharp resurgence in gross fixed capital formation, which rose by 1.2% compared to a 2.1% decline in the fourth quarter of the previous year. Positive momentum was largely attributable to a robust increase in construction investments. Additionally, net external demand made a favorable contribution to GDP growth, as exports advanced by 1.1%, contrasting with a 0.9% decline in the previous quarter, while imports rose at a more moderate rate of 0.6%, compared to a 1.6% decline in the prior period.  

Conversely, private consumption and government spending experienced a 0.4% decline during the period. On an annual basis, the economy contracted by 0.2%, unchanged from the previous period, marking the country’s entry into a technical recession for the first time in over three years. 

(GDP Growth Rate QoQ%，Federal Statistical Office of Germany) 

The DAX index overcame early declines and concluded the trading session flat at 18,693 on Friday. This outcome translated into a sideways movement for the week, positioning the index merely 1% away from the previous week’s record high.  

Markets continued to evaluate the economic landscape and its potential impact on the European Central Bank’s policy stance after June. Robust economic activity and persistent inflation, both domestically and across the Eurozone, as evidenced by the PMI data released during the previous session, diminished the urgency for the ECB to lower borrowing costs.  

The financial sector spearheaded gains during the session, with Munich RE and Deutsche Bank each posting increases exceeding 1%. Additionally, heavyweight automobile manufacturers halted their selling pressure from earlier in the week, as Mercedes, Volkswagen, and Porsche finished firmly in positive territory. Conversely, SAP and Infineon trimmed their gains from the previous day, declining 0.7% and 0.3%, respectively. 

(DAX Index Yearly Chart) 

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