Brandenburg Gate in Berlin, Germany

Germany Economic Forecast

Germany Economic Outlook

After going into recession in Q1, the economy flatlined in Q2. Private and government spending picked up, but investment and exports lost steam, likely owing to recent interest rate hikes and a lagging global economy, respectively. Turning to Q3, our panelists expect the economy contract slightly. Last month, they predicted a slight growth acceleration in Q3, but recent economic data has dimmed expectations. Export, retail and industrial production data all disappointed the market, and inflation data was higher than expected. As well as a lagging global economy, the country is facing the challenge of rising export competition from China: At the latest edition of Germany’s annual auto event in September in Munich, the number of Chinese car manufacturers doubled compared to the last event in the city two years ago.

Germany Inflation

Harmonized inflation fell less than expected in August, to 6.4% from 6.5% in July. Inflation excluding energy and food remained stable, suggesting that price pressures may be stubborn ahead. That said, inflation is projected to ease from current levels through the end of 2023 and 2024 as consumer spending remains weak and the base effect toughens.

This chart displays Economic Growth (GDP, annual variation in %) for Germany from 2013 to 2022.

Germany Economic Data

2018 2019 2020 2021 2022
Population (million) 82.9 83.1 83.2 83.2 83.8
GDP (EUR bn) 3,365 3,474 3,404 3,617 3,877
GDP per capita (EUR) 40,594 41,810 40,929 43,481 46,266
Economic Growth (Nominal GDP, ann. var. %) 3.0 3.2 -2.0 6.3 7.2
Economic Growth (GDP, ann. var. %) 1.0 1.1 -3.8 3.2 1.8
Domestic Demand (ann. var. %) 1.6 1.5 -3.1 2.5 3.2
Private Consumption (ann. var. %) 1.5 1.6 -5.9 1.5 3.9
Government Consumption (ann. var. %) 0.8 2.6 4.1 3.1 1.6
Fixed Investment (ann. var. %) 3.4 1.7 -2.4 -0.2 0.1
Exports (G&S, ann. var. %) 2.2 2.3 -9.3 9.7 3.3
Imports (G&S, ann. var. %) 4.0 3.4 -8.3 8.9 6.6
Industrial Production (ann. var. %) 0.9 -2.3 -7.7 3.6 -0.5
Retail Sales (ann. var. %) 1.8 3.2 4.8 0.6 -0.7
Disposable Income (ann. var. %) 3.7 2.4 1.1 2.5 6.1
Wages (ann. var. %) 3.0 3.0 2.2 1.5 2.6
Unemployment (% of active population, eop) 5.0 5.0 6.1 5.2 5.5
Unemployment (% of active population, aop) 5.2 5.0 5.9 5.7 5.3
Fiscal Balance (% of GDP) 1.9 1.5 -4.3 -3.7 -2.6
Public Debt (% of GDP) 61.9 59.6 68.7 69.3 66.2
Inflation (HICP, ann. var. %, eop) 1.7 1.5 -0.7 5.7 9.6
Inflation (HICP, ann. var. %, aop) 1.9 1.4 0.4 3.2 8.7
Inflation (PPI, ann. var. %, aop) 2.6 1.1 -1.0 10.5 32.9
ECB Refinancing Rate (%, eop) 0.00 0.00 0.00 0.00 2.50
ECB Overnight Deposit Rate (%, eop) -0.40 -0.50 -0.50 -0.50 2.00
3-Month EURIBOR (%, eop) -0.31 -0.38 -0.55 -0.57 2.13
10-Year Bond Yield (%, eop) 0.24 -0.23 -0.62 -0.18 2.56
Stock Market (var. of DAX %) -18.3 25.5 3.5 15.8 -12.3
Exchange Rate (USD per EUR, eop) 1.14 1.12 1.22 1.14 1.07
Exchange Rate (USD per EUR, aop) 1.18 1.12 1.14 1.18 1.05
Current Account Balance (EUR bn) 268 284 240 279 162
Current Account Balance (% of GDP) 8.0 8.2 7.1 7.7 4.2
Merchandise Trade Balance (EUR bn) 228.7 224.0 180.4 175.3 82.3
Foreign Direct Investment (EUR bn) 63.0 46.9 45.9 40.9 10.4

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