In its monthly economic report, the Finance Ministry said after expanding at a blistering pace in the first three months of the year, the German economy would continue growing, but at a much slower rate.
“Gross Domestic Product (GDP) growth in the second quarter is likely to fall considerably compared to the previous quarter,” the Finance Ministry said.
The ministry said a fall in industrial production in May was the most obvious indication that growth was slowing from the red-hot 1.5 percent that it clocked in the first quarter. But the report also pointed to industrial orders well over the long-term average as an indication that production in the second half of the year could once again pick up steam.
German exports, long the economy's growth engine, will likely suffer in the rest of 2008 due to the global slowdown. The weak US economy, the strong euro and higher prices for raw materials will hamper the sale of German goods abroad, according to the Finance Ministry report.
Domestic demand will also be hit by surging inflation. “The expected increase in private consumption over the course of the year is still threatened by considerable risks,” the report said.
But the Finance Ministry also said that Germany's labour market had not yet been affected by the economic uncertainty. Only later in the year would the slowdown likely impact job growth.