Bundesbank sees German growth picking up

German economic growth could pick up again modestly in the first three months of 2016, driven by robust domestic demand, the country's national central bank said on Monday.

"In the first quarter of this year, the German economy could expand at a slightly stronger rate than at the end of last year, powered particularly by increasing internal economic momentum," the Bundesbank wrote in its latest monthly report.

According to the preliminary data released last week, Germany's gross domestic product (GDP) expanded by 0.3 percent in both the third and fourth quarters of 2015 after growing by 0.4 percent in each of the preceding quarters.

In the final quarter, the positive impulses came primarily from domestic demand, with state spending up sharply and private household growing modestly, while lower exports had a dampening effect, the federal statistics office Destatis said.

On Monday, the Bundesbank predicted that "increased momentum will come from consumer spending" at the start of this year.

With oil prices falling further at the turn of the year, households' purchasing power would provide additional impulses, the central ban said.

The recovery in the construction sector was expected to continue thanks to favourable financing conditions.

For 2016 as a whole, the Bundesbank is pencilling in growth of 1.8 percent, slightly more optimistic than the government's forecast of 1.7 percent.

Over the whole of last year, GDP expanded by 1.7 percent.

The Bundesbank believes that extra spending needed to cope with the arrival of more than one million refugees last year will not threaten the government's aim of balancing its budget.