Despite the unusually adverse weather construction sector output slipped by only around ½%, with the steep slide in main construction trades being offset by a strong rise in output in the less weather-prone finishing trades. So the weather is not solely to blame for the modest growth at the start of the year. A further factor pointing to a good start to the year was the fairly strong quarter-on-quarter rise of around 90 thousand in the number of people in work in the first quarter.
Developments on the labor market and in gross domestic product are currently out of sync. As in 2012 as a whole, labor productivity per employee in the first quarter 2013 was down on a year earlier. In the first quarter of this year the decline in labor productivity (in terms of working-day adjusted gross domestic product) was no less than 0.9% on the first quarter 2012. This weak productivity performance cannot be explained in purely cyclical terms. Should it continue, it would point to a considerable problem for the German economy. However, statistical under-reporting of output components might be playing a role in calculating productivity.
We expect economic activity to start picking up substantially this quarter. Private consumption could surprise on the upside. The trend in employment is positive and real incomes are benefiting from the appreciable drop in inflation. Average growth in the region of 1% in 2013 is still possible.