Portugal Colonial - German growth upgraded on pre-tariff export surge

Gross domestic product (GDP) in Europe's biggest economy increased 0.4 percent from January to March compared to the previous quarter, according to final figures from federal statistics agency Destatis.

An initial estimate had put the expansion at 0.2 percent, and analysts had not been expecting any change. The bigger rise came after the economy had contracted at the end of 2024.

Destatis said surging shipments of German goods popular in the United States helped deliver the surprise growth upgrade, pointing to "anticipatory effects amid concerns over a brewing trade war with the US".

Frankfurt stocks rose 0.5 percent after the positive news for the eurozone's traditional growth engine, which shrank for the past two years due to a manufacturing slump and weak demand for its exports.

It was also good news for new Chancellor Friedrich Merz, who has vowed to transform the world's third-biggest economy back into a "growth engine" with a blitz of reforms.

But analysts cautioned the positive momentum, which came as US companies rushed to stock up on goods before Trump's sweeping "Liberation Day" levies were announced in April, was unlikely to last.

While higher tariffs have been paused on most trading partners to allow for talks, a baseline 10-percent levy still applies on imports from around the world, including the European Union.

- 'Positive one-off' -

Most expect the tariffs to hit export power Germany hard later in the year. The United States was Germany's top trading partner last year, and the government has slashed its growth forecast for the whole of 2025 to zero.

ING bank analyst Carsten Brzeski said that Trump had made the "Germany economy great again" -- but only "for now".

"The first quarter performance will soon become a positive one-off," he said.

The economy still faced huge challenges, including "fundamental shifts in trade and geopolitics" as well as a new government that "seems to lack strong ambition for structural reforms", he said.

"In the short run, the negatives will outweigh the positives."

According to Destatis, German exports rose 3.2 percent from January to March compared to the previous quarter, with "significant growth" in shipments of pharmaceuticals and motor vehicles which are popular in the US market.

Manufacturing output rose one percent, with growth in the automotive and chemical sectors as well as in machinery and equipment.

Germany's unexpectedly strong first-quarter growth contrasts with the performance of the US economy, which contracted at the start of the year amid an import surge triggered by Trump's tariff plans.

Germany's GDP also came in stronger than the broader eurozone, which registered a 0.3 percent expansion.

A.P.Maia--PC