GERMANY'S economy will likely have grown significantly more in the second quarter than in the first, the Finance Ministry said today, adding that the recovery should strengthen in the second half of the year.

In its monthly report, the ministry said the improved growth in Europe's largest economy was partly due to a pick-up in the construction sector in the second quarter after a slow-down over the winter due to harsh weather.

Increased momentum in the industrial sector was also likely to have contributed very positively to gross domestic product (GDP) in the second quarter. The economy grew by 0.2 percent on the quarter in the first three months of the year.

"Given the upwards trend in industrial demand and the optimistic mood among companies, the economic recovery should strengthen in the second half of the year," the ministry said.

"The recent positive development however should not obscure the fact that with important indicators, pre-crisis levels have not yet been reached and production is still below-capacity."

Germany emerged from its deepest post-war recession in the second quarter of 2009 and recent indicators have pointed to a pickup in the pace of recovery.

German trade with the rest of the world surged in May, while industrial output jumped more than expected, data showed earlier this month.

The ministry said output was likely to continue rising over the coming months and Germany was benefiting in particular from demand for its capital goods, as demand worldwide and especially in emerging Asian countries picked up.

"The outlook for a further rise in exports is good," the ministry said, adding that the rise in imports and domestic orders pointed to recovering domestic demand.

Private consumption was likely to have remained weak in the second quarter but will pick up in the course of the year due to a recovery in the labor market and tax relief for households introduced by the government at the start of 2010, it said.

The ministry said it did not expect the labor market to deteriorate, given that unemployment was decreasing as the use of shorter working hours declined and economic indicators were positive. German unemployment fell in June to its lowest level since December 2008.

The ministry added that consumer prices were likely to develop "calmly" over the course of the year.