FRANKFURT—German economic growth accelerated at the start of the year helped by robust domestic demand, particularly in the construction sector, according to the Federal Statistical Office.

Confirming its earlier assessment of Europe's largest economy, Destatis on Tuesday said that Germany's gross domestic product grew at a quarterly rate of 0.7% in the first three months of the year, which translated into an annualized rate of 2.7%. Growth in the quarter was more than double the rate of 0.3% recorded in the fourth quarter of 2015. The outcome is in line with Destatis' flash GDP release from May 13.

"Positive impulses came mainly from the domestic economy," Destatis said. "Investment, in particular, picked up noticeably at the start of the year."

Economists cautioned that Germany's economy probably won't be able to maintain its brisk growth pace in the second quarter. Accelerating growth at the start of this year was partly the result of the mild winter weather buoying construction activity and followed weak activity at the end of 2015.

"Early data for the second quarter point to payback from the one-off effects that boosted first-quarter GDP," said Elga Bartsch, the chief European economist at Morgan Stanley in London. "The industrial sector had a jump-start in January but, in the course of the quarter, there was a visible loss of growth momentum," Ms. Bartsch wrote in a note to clients.

Destatis said that construction investment in Germany grew 2.3% in the first quarter from the preceding period, while investment in machinery and equipment rose 1.9%.

Public consumption picked up 0.5% from the fourth quarter, Destatis said, as federal and local government faced rising costs related to the record influx of migrants. A buoyant labor market and low energy prices, meanwhile, continued to fuel household consumption, which grew 0.4% in the first quarter from the preceding period.

Net trade however weighed slightly on GDP growth in the first quarter, as a pickup in exports was outpaced by imports, Destatis said. Total exports of goods and services rose 1.0% in the first quarter from the preceding period, while imports increased 1.4%.

Germany's GDP in the first quarter was up 1.6% from the year-earlier period, taking account of calendar effects, in line with a flash estimate by Destatis.

Write to Nina Adam at nina.adam@wsj.com

 

(END) Dow Jones Newswires

May 24, 2016 03:25 ET (07:25 GMT)

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