Germany Economic Forecast

Germany Economic Outlook

December 20, 2019

Germany avoided a technical recession in the third quarter as stronger private consumption growth firmed domestic demand. The government’s slightly more expansionary stance also boosted the economy, as did the external sector’s turnaround. However, prospects for the final quarter remain dim. Although exports grew robustly in October over the prior month, retail sales contracted at the sharpest rate in 10 months in the same month. Moreover, business sentiment remained depressed through November, while industrial output fell to a six-month low in October and the manufacturing PMI stayed in contractionary territory through December. More positively, the services sector seemingly remained in good health in the quarter, while still-muted inflation and a tight labor market in October–November bode well for household outlays.

Germany Economic Growth

Growth should shift into a higher, albeit still low, gear next year as low inflation, a tight labor market and cheap credit conditions support domestic demand. Nevertheless, the balance of risks remains tilted to the downside and hinges largely on external events such as Brexit and the China-U.S. trade conflict. Tensions between the EU and the U.S. will also play a key role. FocusEconomics Consensus Forecast panelists project the economy to expand 0.7% in 2020, which is unchanged from last month’s projection, and 1.2% in 2021.

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Germany Facts

Value Change Date
Bond Yield-0.190.41 %Jan 01
Exchange Rate1.120.65 %Dec 31

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