After a disastrous first quarter, “the recessionary trend has clearly weakened” in Europe’s biggest economy, the Bundesbank central bank said.
Economic activity “should have fallen only slightly” after a record contraction of 3.8 percent in the first three months of the year from the previous quarter, it added.
Finance Ministry officials agreed, saying: “Available economic data support the hypothesis that second quarter economic activity was undoubtedly better than expected.”
A surprise increase in May industrial orders and production were signs of the improvement, the ministry said.
Although corporate investment likely decreased in the second quarter, trade is expected to contribute to gross domestic product, the central bank said, mainly because imports decreased by more than exports.
Construction activity also probably expanded during the traditional spring surge, helped by an increase in publicly-funded infrastructure projects.
Weak inflation combined with a state-funded car wreckage premium has given consumption a boost as well, the Bundesbank said.
The final second quarter growth figure is to be released on August 13.
For all of 2009 however, the government has forecast an economic contraction of six percent, the most since World War II.
A threat to economic recovery is nonetheless posed by deteriorating credit conditions and the government is trying to convince banks to lend more to businesses so that the first signs of growth are not stamped out.