Germany Economic Forecast

Germany Economic Outlook

November 20, 2018

Chancellor Angela Merkel announced she will step down as CDU-party chief in December and as chancellor when her current term ends in 2021, which could create a power vacuum in the heart of Europe. The news came in the wake of the Bavarian and Hessian state elections in which the ‘grand coalition’ partners lost ground to the opposition and the far-right AfD. Against the backdrop of increasing political turmoil and following a series of disappointing monthly data, national accounts data showed that the economy shrank for the first time in over three years in the third quarter. This was chiefly due to a weaker external sector, which weighed on the economy and likely suffered from trade-related uncertainties and some one-off effects. Meanwhile, domestic demand painted a mixed picture with private consumption decreasing despite elevated consumer confidence and a low unemployment rate. The economy is expected to rebound in the fourth quarter. Business sentiment was robust in October and consumer sentiment remained elevated through November. The composite PMI, furthermore, continued to indicate improved business conditions, although the growth rate remains at a two-year low.

Germany Economic Growth

Resilient domestic demand and a pick-up in exports growth should buttress the economy next year. Private consumption is expected to benefit from the minimum wage increase from 1 January. However, a disorderly Brexit and a flare-up in tensions between the EU and the United States remain dark clouds on the horizon. FocusEconomics Consensus Forecast panelists expect the economy to expand 1.7% in 2019, down 0.1 percentage points from last month’s forecast, and 1.6% in 2020.

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Germany Facts

Bond Yield0.270.41 %Dec 12
Exchange Rate1.140.65 %Dec 12
Stock Market10,929-0.41 %Dec 12

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