German growth to slow in first quarter after strong end to 2014 - finance ministry

BERLIN (Reuters) - German economic growth probably slowed in the first quarter of this year compared with the 0.7 percent expansion it pulled off in the final three months of 2014, the finance ministry said on Thursday.

A sharp increase in household spending was likely to have propelled growth in Europe's largest economy between January and March, as consumers benefited from rising employment and wages and as cheap energy boosted their purchasing power, the ministry said in its monthly report.

Recent strength in consumer spending, among other factors, prompted the German government to lift its full-year economic growth forecasts on Wednesday to 1.8 percent for this year and next.

But industry and exports are not faring quite as well as they were in the fourth quarter, even though exports are benefiting from a weak euro, the ministry said.

"Industrial activity remains on an upward trend at the start of this year but in the first two months of the new year it cannot reach the same level of dynamism seen in the final quarter of 2014," the ministry said.

"This indicates that the increase in gross domestic product will probably, as expected, be lower than the very good result of the fourth quarter."

Economists polled by Reuters expect the economy grew by 0.5 percent in January-March from the previous three months.

While German exporters were benefiting from a weaker euro and increased demand from other oil-importing countries related to lower oil prices, export growth was capped by "rather subdued" economic growth in emerging markets and the euro zone, the ministry said.

(Reporting by Michelle Martin; Editing by Susan Fenton)