Germany Economic Forecast

Germany Economic Outlook

November 21, 2017

Coalition talks failed on 19 November, likely due to differences over immigration policy. Analysts now see the possibility of new elections, which heightens political uncertainty. The news comes as preliminary data revealed an acceleration of growth in Q3 in both annual and quarter-on-quarter terms, beating expectations. Robust trade and investment did the heavy lifting, as private and public consumption appeared to have lost steam in the quarter. The slowdown is likely to be temporary; buoyant labor market dynamics and low inflation bode well for household consumption. Buttressed by positive momentum in Eurozone economies and the U.S., the external sector contributed positively to growth in Q3 despite a month-on-month contraction in both exports and imports in September. Indicators suggest that the positive streak is likely to continue through year-end: New orders grew at the fastest rate in over six years according to the October PMI. In the same month, business confidence reached its highest level in the history of the survey.

Germany Economic Growth

Solid momentum is expected to continue in 2018. Low interest rates and a strong labor market are likely to drive the private sector economy and household consumption, which should also benefit from increasing wages. Moreover, labor demands are outpacing labor supply, which bodes well for private consumption. Prolonged political uncertainty, however, poses a sizeable downward risk for both Germany and the EU. Analysts see GDP growth at 2.0% in 2018, up 0.1 percentage points from last month’s estimate, and 1.7% in 2019.

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Germany Facts

ValueChangeDate
Bond Yield0.300.41 %Dec 06
Exchange Rate1.180.65 %Dec 06
Stock Market12,999-0.41 %Dec 06

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