Bundesbank sees German economy returning to growth

The German economy, which contracted at the end of last year, likely returned to growth in the first quarter of this year and the upward trend looks set to continue, the Bundesbank said Monday.

"Even if no growth impulses were seen coming from manufacturing industry in the first quarter of 2013, services should have expanded again. Against this background, a rise in overall economic output is possible," the German central bank wrote in its April monthly report.

A pre-condition for this, however, was that the effects of the unseasonably cold winter weather, in sectors such as construction, remained contained, the report noted.

Nevertheless, looking ahead, "generally positive sentiment, the ongoing rise in employment and a recovery in demand for capital goods suggest that the upward trend in the German economy will continue in the second quarter," the Bundesbank said.

While Germany has largely been spared the recession that has hit many of its eurozone partners, Europe's biggest economy has not managed to remain completely unscathed and growth slowed throughout the course of last year and activity actually contracted in the last three months of 2012.

Thus, growth which stood at 0.5 percent in the first three months of 2012, slowed to 0.3 percent in the second quarter and 0.2 percent in the third quarter.

In the final quarter, GDP contracted by 0.6 percent, bringing overall full-year growth to just 0.7 percent across the whole of the year, compared with 3.0 percent in 2011.

The federal statistics office Destatis is scheduled to publish its first official estimate of first-quarter GDP on May 15.

Last week, Germany's leading economic think tanks said that the economic skies above Europe's top economy appear to be clearing and the recovery looks set gather momentum during the course of this year.

Four top institutes -- Ifo in Munich, IfW in Kiel, IW in Halle and RWI in Essen -- predicted in their annual spring report that gross domestic product (GDP) would expand by 0.8 percent in 2013 and then by 1.9 percent in 2014.