BERLIN (Reuters) - The German economy powered ahead at the start of 2017 and is likely to grow at a stronger pace in the first quarter than in the previous three months, the Economy Ministry said on Wednesday.

Europe's biggest economy grew by 0.4 percent on the quarter in the final three months of 2016, helped by higher state spending on refugees, increased private consumption and higher investment in housing.

"After a good start, economic output could expand at an accelerated pace in the first quarter," the ministry said in its monthly report.

It said that global conditions and national indicators pointed to moderate growth in German exports, adding that economic fundamentals for construction were also good.

Sentiment indicators also suggested a brighter economic outlook and the mood among consumers and retailers remained confident overall, the ministry said.

In 2016 as a whole, the German economy grew by 1.9 percent, the strongest rate in five years. But the government expects growth to slow this year to 1.4 percent, mainly due to fewer workdays.

(Reporting by Michael Nienaber; Editing by madeline Chambers)