Germany Economic Forecast

Germany Economic Outlook

June 26, 2018

The economy continues to stumble against an increasingly uncertain global and domestic political background. First-quarter data disappointed, and available figures for the second quarter continue to be lackluster. At the start of the quarter, industrial production moderated, while retail sales were weak despite record-low unemployment levels continuing into May. Moreover, in the second quarter, the average PMI, consumer confidence and business sentiment readings trended lower compared to the prior quarter. Business confidence deteriorated on the back of pessimistic outlooks on future business conditions amid global and domestic geopolitical tensions. The United States could slap tariffs on European cars, which would especially hit German industry, given Germany’s position as Europe’s leading car manufacturer. Politically, Chancellor Angela Merkel’s coalition looks shaky, as pressure builds over the EU’s migration policies.

Germany Economic Growth

Downside risks are building. In the short term, there is notably political uncertainty at home, but in the medium term escalating tensions with the U.S. represent the biggest risk. Despite disappointing monthly data, FocusEconomics Consensus Forecast panelists expect the economy to pick up pace in the remainder of the year and expand 2.2% in 2018, down 0.1 percentage points from last month’s forecast. The economy is expected to be carried by healthy government consumption, private consumption and fixed investment. Strong wage growth should buttress household consumption. Next year, the panel foresees growth of 1.9%.

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Germany Facts

Bond Yield0.280.41 %Jul 13
Exchange Rate1.170.65 %Jul 13
Stock Market12,541-0.41 %Jul 13

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