Positive signs from Germany but more stimulus needed

The German economy got off to a strong start to the year. The healthy 0.7% expansion of GDP in Q1 was driven primarily by a pick-up in investment but also increases in public and private consumption. This was encouraging, given criticisms of tight fiscal policy and low investment in Germany.

Nevertheless, we still think that the German government could do more to boost growth at home and across the euro-zone. This would also mean that the ECB would have to do less of the heavy lifting in order to raise inflation from its very low level.