The German economy recorded robust growth in the first quarter of 2016. Domestic factors were probably the main drivers behind the significant expansion, according to the Bundesbank's latest Monthly Report. Bundesbank economists primarily attribute the increase to buoyant consumption and the construction sector benefiting from favourable weather conditions. By contrast, exports generated relatively little stimulus, the economists note.

Consumer prices rose quite considerably in March by a seasonally adjusted 0.3%, after contracting in the three previous months. The Bundesbank's economists believe that this was due in part to higher energy prices. On the other hand, some food products and package holidays became significantly more expensive, with the early Easter holiday also likely to have played a role.

Employment continued to show clear growth in February, according to the Monthly Report. Jobs subject to social security contributions in particular are likely to have generated stimuli for job growth. After seasonal adjustment, the total number of persons in work rose by 52,000 to 43,392,000 on the month.

Further topics in the Monthly Report

In addition to economic conditions, the current Monthly Report also analyses public finances. Furthermore, the Bank's economists consider the question of what valuation level is appropriate on the stock markets. The article devoted to this subject elaborates on the dividend discount model customarily used for valuations. Finally, the Monthly Report also features an examination of whether inflation developments in Germany over the past few years can be understood in the context of the Phillips curve.