BERLIN  - Germany's economy likely avoided a recession at the start of the year, escaping the fate of the wider euro zone, as Europe's largest economy managed to find buyers for its high-quality products to counter weak demand closer to home.

Flash gross domestic product (GDP) data, due on Tuesday at 07:00 a.m. British time, are expected to show the economy expanded by a meagre 0.1 per cent in the first quarter after a 0.2 per cent contraction - the first since the height of the 2009 financial crisis - at the end of last year, thus narrowly escaping a recession.

The GDP data follow a run of strong economic data - including industrial orders and record trade figures this week and contrast with the wider euro zone, which is expected to have shrunk again in the first quarter.

"After good data... this week, the start of the year now looks more positive than previously thought," said Commerzbank economist Ulrike Rondorf. Commerzbank expects 0.2 per cent growth.

Euro zone data are also due on Tuesday, an hour after the German data, and are seen showing a 0.2 per cent contraction.

While Germany has been able to build up sales of its products to non-European markets in Asia and elsewhere, it has been unable to shrug off the euro zone debt crisis altogether and economists will look to wage rounds to see if salary hikes bolster domestic demand.

Data from the ZEW think tank due on Tuesday will likely show German analyst and investor sentiment easing slightly in May, albeit from its highest level since June 2010.

"The trend in the coming quarters will depend on whether wage hikes and the strong labour market will translate into more consumption so domestic demand is able to take over the growth baton from trade," said ING's Carsten Brzeski.

"With the anaemic American upswing, a weakening Chinese economy and dwindling demand from all euro countries, life on Mars would need to be discovered in order to continue the export successes of the last few years."

Merkel faces calls from both her centre-left opponents at home and many European governments to relax the austerity measures that, as leader of Europe's largest economy, she has prescribed as the remedy for the sovereign debt crisis.

Data for German wholesale prices are also due next week and are seen rising by 2.3 per cent on an annual basis, according to a Reuters poll.

Both Germany's government and its central bank have signalled they will tolerate higher prices as long as euro-wide inflation remains under control.

Acceptance of higher inflation in Germany, for example through higher wage deals, could help struggling states in Europe's southern periphery by boosting demand for their goods and bolstering their competitiveness relative to Germany.