Germany Economic Forecast

Germany Economic Outlook

January 30, 2018

Data recently released by the German government showed that the economy grew 2.2% in 2017. Domestic demand was the main pillar of growth last year, underpinned by a buoyant labor market with strong employment and wage growth. Although the full-year growth rate was released without hard data for the final quarter of the year, the economy likely moderated slightly in Q4. In November, industrial production rebounded strongly in month-on-month terms from a contraction a month prior. Exports also rebounded in November from the previous month. Moreover, indicators suggest that the momentum in 2017 spilled over into Q1 2018. Consumer confidence rose in January, while the PMI remained strong in the same month. On 21 January, the SPD party congress voted in favor of entering formal coalition negations with Angela Merkel’s CDU. While an agreement is expected to contain some tax reductions and increased public spending, it will likely be devoid of structural reforms or ambitious EU initiatives.

Germany Economic Growth

Domestic demand is expected to keep economic growth afloat this year as private consumption benefits from strong labor market dynamics, and fixed investment should be encouraged by a robust manufacturing sector. Household spending could also benefit from any fiscal stimulus plans of the new government. Meanwhile, the political risk to economic growth has likely decreased. However, a strong euro could still drag on exports. Analysts see GDP growth at 2.3% in 2018, up 0.1 percentage points from last month’s estimate, and 1.8% in 2019.

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Germany Facts

Bond Yield0.650.41 %Feb 22
Exchange Rate1.230.65 %Feb 22
Stock Market12,462-0.41 %Feb 22

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