A further rise in retail sales suggests that private consumption boosted economic growth in the first quarter of this year. Construction investment probably also played a positive role, buoyed by a relatively mild winter. By contrast, external trade probably failed to contribute to growth. Although nominal merchandise exports rose slightly, the increase in imports was substantially stronger. The marked drop in new foreign orders in the early months of this year suggests that the global economy was not running smoothly. However, a number of special factors were likely at play here.
In our view there is no reason to be skeptical about the second quarter. Changes in the external value of the euro take time to feed through into exports. The steep slide in the euro since the middle of last year is likely to boost exports substantially, even though it has stabilized again of late. Buoyant private household income growth and the favorable business earnings picture will continue to fuel the domestic economy. We are therefore expecting stronger growth in the second quarter.