By Nina Adam 

FRANKFURT--German economic growth slowed in the first quarter and companies scaled back their business expectations in May, according to data published Friday, clouding the outlook for Europe's largest economy.

Doubts about the strength of the economy had already been building in recent weeks, because of weakness in some of Germany's key trading partners --such as the U.S., China and Russia--as well as sluggish investment spending and production.

The Ifo think tank said Friday that its business climate index slipped for the first time in seven months, to 108.5 in May from 108.6 in April, as manufacturers lowered their export prospects. But the outcome was better than economists had predicted and more upbeat than the results of an earlier survey of purchasing managers.

"The German economy remains on track," Ifo President Hans-Werner Sinn said. Ifo predicts gross domestic product growth of 2.1% in 2015 and 1.8% in 2016. Every month, Ifo asks about 7,000 companies in manufacturing, construction, wholesaling and retailing about their business expectations for the next six months and their assessment of the current situation.

"All in all, the Ifo survey points to a robust business environment so far in the second quarter", said Barclays economist Thomas Harjes. He expects the economy to keep its pace of economic expansion in the second quarter.

Europe's largest economy grew by a quarterly rate 0.3% in the first quarter, the federal statics office, Destatis, said Friday. This was in line with an earlier estimate by Destatis, but down from 0.7% growth in the fourth quarter.

Domestic demand propelled activity in the first quarter, as both private consumption and investment spending increased. But sluggish exports and falling inventories meant growth fell short of an extraordinarily strong fourth quarter.

Household consumption was up 0.6% as consumers took heart from a buoyant labor market, rising wages and lower energy prices. Government consumption climbed 0.7%. There were also more signs of resurging investment activity. Equipment spending jumped 1.5% on the quarter and construction investment was up 1.7%.

Write to Nina Adam at nina.adam@wsj.com