Germany's Ifo says economy to grow 0.6 percent in 2013

Germany's Ifo institute has trimmed its forecast for economic growth this year to 0.6 percent because Europe's largest economy had a subdued first quarter and only narrowly avoided a recession, it said on Wednesday.

Ifo, which in December had forecast growth of 0.7 percent for 2013, remains more optimistic than the government and the Bundesbank, which expect growth of 0.5 percent and 0.3 percent respectively.

The German economy eked out 0.1 percent growth in the first quarter on the back of private consumption after contracting in late 2012. It is widely expected to have performed better between April and June.

"After a weak winter, the German economy will probably pick up over the course of 2013. That is what is suggested by the Ifo business climate index, which has stabilized at an above-average level in recent months," Ifo said in a statement.

Earlier this week the institute's closely-watched business sentiment survey showed morale edging up for a second consecutive month in June, though a fragile global backdrop suggested the mood could darken.

"In the second half of the year the economy will probably slow again in comparison to the second quarter, when there were a lot of catch-up effects," Ifo said on Wednesday.

Ifo expects the economy to regain momentum next year and grow by 1.9 percent - more than the 1.6 percent and 1.5 percent growth expected by the government and the Bundesbank respectively. It said its forecasts were subject to euro zone states implementing structural reforms.

Consumer prices will rise by 1.6 percent this year and by 1.8 percent next year, Ifo said.

It expects the unemployment rate to edge up to 6.9 percent in 2013 and 7.0 percent in 2014 from 6.8 percent last year, partly because immigration will lead to an increase in the number of those eligible to work.

Recent data points to the German economy gradually regaining traction, with business, consumer and investor sentiment improving, foreign trade and output increasing and the private sector expanding slightly, though industrial orders have slumped and unemployment has edged up.

(Additional reporting by Joern Poltz; Editing by Stephen Brown)