German Market Intelligence

This section is produced in co-operation with Germany Trade & Invest

Economic Reports

German Central Bank (Deutsche Bundesbank)

August 2019

Economic slowdown due to persistent weakness in industry

In the second quarter of 2019, the global economy probably expanded at a slightly slower pace than in the preceding quarter. The upturn decelerated distinctly in the advanced economies, in particular. A key reason was that one- off factors that had supported growth in the first quarter were no longer present. After a strong start to the year, the euro area economy returned to the weak growth path it had been charting previously. Economic growth also slowed in the United States, although final domestic demand gained significant momentum. In the United Kingdom, real gross domestic product (GDP) even contracted. The rate of growth in the Chinese economy, which is high by international standards, fell slightly.

July 2019

Underlying trends

Economic output in Germany is likely to have contracted slightly in the second quarter of 2019. The domestic economy probably continued to provide impetus. The labour market situation was still favourable although the slowdown in economic activity started to leave its mark. However, one-off effects that were driving growth during the first quarter petered out. Construction activity is likely to have declined after a still very strong expansion in the first quarter supported by favourable weather conditions. Moreover, passenger car registrations returned to normal. There had been a sharp rise previously, as car purchases were made which had been postponed in the second half of 2018 due to supply difficulties. This dampened private consumption in the second quarter. The decline in business with the UK weighed additionally upon already weak exports. In the first quarter, a significant number of purchases were brought forward in the run-up to the original Brexit date at the end of March. Even excluding these negative one-off factors, the underlying cyclical trend remained weak. This was mainly due to the fact that the downturn in the chiefly export-oriented industry was continuing. Exports and industry are still not showing any signs of a recovery.

June 2019

Underlying trends

German economic output is likely to contract slightly in the second quarter of 2019. Special factors that contributed to a marked increase in gross domestic product (GDP) in the first quarter of this year have run their course or are even going into reverse. Looking at the quarterly average, certain rebound effects are to be expected in the construction sector, for ex-ample, after a very strong weather- related expansion of activity in the winter months. Furthermore, car purchases were put on hold last autumn owing to supply difficulties following the introduction of the new worldwide harmonised light vehicles test procedure (WLTP) and most of these cars have been bought in the meantime. Fiscal stimuli, too, are having a significantly reduced impact. Finally, advance purchases in the United Kingdom in the run- up to leaving the European Union, which was originally scheduled for the end of March, are now probably having a negative impact on ex-ports. Added to this is the continuing sluggish underlying cyclical trend, which is due chiefly to the ongoing downturn in industry. The expansionary forces for more domestically oriented sectors are still fundamentally intact, however. The picture of a two- speed economy is thus set to continue.

May 2019

Industrial downturn; domestic economy remains resilient

As was already the case in the final quarter of 2018, the global economy probably expanded at just a moderate pace at the start of the year. Developments were fairly varied from region to region, however. In the euro area, real gross domestic product (GDP) grew more strongly again. GDP also saw clearer growth in the United States. In both currency areas, though, favourable one- off factors are likely to have played a part in the pick- up. The Japanese economy seems to have weakened. In China, GDP rose at a similar pace as in the previous quarter, according to official data.

The current assessment contained in the April World Economic Outlook (WEO) published by the International Monetary Fund (IMF) reflects the fact that global activity has persisted at a moderate level. In the Outlook, the IMF made another downward revision to its forecast for global economic growth (based on purchasing power parity weights) this year – to the new level of 3.3%. Nonetheless, the IMF regards the recent slowdown in global economic activity as a temporary blip and expects to see a gradual recovery in the second half of 2019. It therefore left its global growth forecast for 2020 un-changed at 3.6%. As things stand, however, the outlook for the global economy appears extremely uncertain. This is partly down to the unresolved trade disputes, in particular.

April 2019

Underlying trendsThe German economy is likely to have grown moderately in the first quarter of 2019. Domes-tic one- off effects were likely to have been a key factor here, however. The already booming construction sector benefited additionally from the favourable weather in February. Further-more, private consumption has probably emerged from the weak spell seen in the second half of 2018. It was buoyed by the fiscal measures entering into force at the turn of the year which enhanced consumers’ scope for spending. This is reflected in the recent signifi-cant rise in retail sales. Additional boosts to pri-vate consumption probably came from brisk passenger car sales. Consumers evidently caught up on new car purchases, which they had postponed in the autumn due to the limited range of models on offer. The automo-tive industry was hit by difficulties with the introduction of a new emissions test procedure (Worldwide Harmonised Light Vehicles Test Procedure: WLTP) at the time. However, not taking these one- off effects into consideration, the underlying trend of the German economy remains subdued. This is mainly due to the pro-tracted downturn in industrial activity, with new orders plummeting towards the end of the period under review and sentiment among enterprises becoming even gloomier, according to the ifo Institute.

March 2019

The German economy’s underlying cyclical trend remained subdued at the beginning of 2019. This was due primarily to industrial activ-ity continuing to cool. Manufacturing could thus dampen overall economic growth for the third consecutive quarter.1 Following the de-cline in output in the second half of 2018 due to the introduction of a new emissions test procedure, major catch- up effects in the auto-motive sector are not expected for the current quarter. The downturn is likely to have con-tinued in other industrial sectors. According to the ifo Institute, sentiment amongst enterprises in the manufacturing sector continued to de-teriorate significantly towards the end of the period under review. By contrast, the construc-tion sector and private consumption are prob-ably buoying growth. The sharp rise in retail sales indicates that private consumption could pick up more clearly again. Consumers are benefiting from the continued positive labour market and income prospects. Furthermore, the fiscal measures which entered into force in the first quarter of 2019 are giving consumers additional leeway to spend.

February 2019

Global economic growth in the final quarter of 2018, too, is unlikely to have matched the pace recorded in the first half of the year. This is true of both the advanced economies and the emerging market economies, although very pronounced differences exist between the individual countries. While the previously strong macroeconomic growth seen in the United States was probably only slightly weaker in autumn, gross domestic product (GDP) in the euro area again increased by only a moderate amount. China’s gradual slowdown in growth continued. On the whole, following a period of stronger growth from end-2016 to mid-2018, the global economy now appears to be on a more moderate expansionary path once more.

Against the backdrop of this slowdown, the International Monetary Fund revised its global growth forecast somewhat downwards in its January update to the World Economic Outlook, deeming the short-term prospects for the euro area to be less favourable than in October. On account of considerably lower oil prices, it also scaled back its growth forecasts for crude oil-exporting countries slightly. The outlook for most of the other economies, on the other hand, did not change significantly. Overall, therefore, the IMF anticipates only marginally slower global economic expansion than in 2018 for the current year and the year thereafter. In its outlook, however, risks are tilted to the downside. In addition, the recent continued deterioration of global sentiment and leading indicators suggests that the IMF’s latest projection may overstate global economic momentum.

January 2019

The German economy is likely to have grown again in the final quarter of 2018, albeit only modestly. Growth probably did not return to the robust pace of the first half of 2018 following the setback in the third quarter as had initially been expected. This is primarily attributable to disappointing developments in industry. Output in the automotive industry is probably returning to normal only very gradually after the introduction of a new emissions test procedure (Worldwide harmonized Light vehicles Test Procedure: WLTP) caused extensive production stoppages during the third quarter. Economic indicators do suggest that the manufacture of motor vehicles might be stepped up again soon, with orders received, in particular, having experienced a significant recovery. Furthermore, towards the end of the period under review, the number of new motor vehicle registrations in Germany was roughly back up to the second quarter level again. Irrespective of this, however, data provided by the German Association of the Automotive Industry (VDA) show that the seasonally adjusted number of passenger cars produced in December was only marginally higher than the November figure and still considerably below the second quarter’s level. Furthermore, in other manufacturing sectors, output experienced a broadbased and steep decline in November. A significant drop in industrial output can therefore now also be expected for the fourth quarter as a whole. By contrast, positive stimuli will probably have been provided by private consumption given the continuing excellent labour market situation and substantial wage growth. This is suggested by the strong increase in retail sales in November.

According to provisional figures released by the Federal Statistical Office, real gross domestic product increased by 1.5% in 2018 (also 1.5% after calendar adjustment). Growth in aggregate output thus weakened noticeably as compared with the robust acceleration of 2.2% (as much as 2.5% after calendar adjustment) in the previous year. On the output side, this was mainly attributable to lower growth in manufacturing. Another factor were the automotive industry’s production stoppages in the third quarter, which were responsible for the decline in economic output in the third quarter. On the demand side, much more moderate growth in German exports, in particular, had an impact.

December 2018

Having experienced a noticeable setback in the third quarter, the German economy is expected to see marked growth again in the final quarter of 2018. The direction of the underlying cyclical trend is currently only moderately upwards. However, the output of motor vehicles is expected to be ramped up gradually after a sharp contraction in the third quarter, which was probably due mainly to difficulties with a new procedure for measuring emissions. Nonetheless, the normalisation in the automotive sector will possibly be slower than assumed initially. One indication of this is that, according to data provided by the German Association of the Automotive Industry (VDA), the number of passenger cars produced in October and November was not up on the third-quarter level in seasonally adjusted terms. Orders received in the sector increased substantially in October but this was driven solely by orders from abroad. Weak domestic incoming orders and depressed registration figures could be an indication that consumers in Germany are currently holding back with their purchases. The debate about driving bans for older diesel cars in particularly polluted towns and cities might be a factor here. By contrast, the boom in the construction sector continues. The outlook for the labour market and employees’ incomes is still excellent, too. However, sentiment among businesses has clouded over perceptibly of late. Overall, in spite of certain catch-up effects in the automotive sector, the expansion in the German economy is not likely to be stronger in the current quarter than the average for the first half of the year.

November 2018

The global economy is likely to have lost some momentum during the third quarter, particularly within the group of advanced economies. Whereas the strong economic upturn levelled off only slightly in the United States, growth in the euro area slowed markedly, and output even declined somewhat in Japan. However, in the latter two cases, temporary pressures played a role. By contrast, economic growth in the United Kingdom was distinctly more brisk. Among the emerging market economies, growth in the Chinese economy, whilst still high by international standards, dipped slightly. Overall, the global economy remains buoyant, albeit with significant regional differences.

October 2018

Although the economic upswing in Germany is essentially still intact, it may have come to a temporary halt in the third quarter of 2018. This was probably due to considerable difficulties in the automotive sector in certifying vehicles according to a new emission test procedure, the WLTP (Worldwide harmonized Light vehicles Test Procedure). The associated temporary production losses severely dampened industrial output. In addition, the booming construction sector is expected to slow down after the strong growth in the second quarter. According to the information available to date, retail sales were also relatively subdued. However, the pause in growth is unlikely to continue for very long and the difficulties in the automotive sector should soon be over. This is indicated by the business expectations in this sector, which again rose significantly of late. According to the ifo Institute, the business climate in Germany also brightened noticeably in the third quarter as a whole, which means that a significant expansion in economic output is to be expected in the current three month period.

September 2018

The German economy made a weak start to the third quarter following fairly robust growth in the spring. This was mainly due to industry and, in particular, to the automotive sector, which cut back production strongly in July. Problems related to the change to a new EUwide standard and mandatory emissions testing procedure for newly registered vehicles are likely to have been a major factor in this context. The ongoing positive sentiment among businesses, which according to Ifo Institute surveys also improved again in the industrial sector recently, points to a temporary lull. The upturn in Germany is likely to be essentially intact, not least because domestic economic activity remains buoyant. Construction output thus remained on a significantly upward trajectory and, in keeping with the buoyant employment growth, the services sectors provided the economy with positive impulses, too. The pace of aggregate growth is likely to pick up again considerably once the changeover problems in the automotive sector have been overcome.

August 2018

Following a slight slowdown in growth over the past few quarters, global economic activity rebounded in the second quarter of 2018. The upswing stabilised in the advanced economies, in particular. The United States recorded its strongest growth in real gross domestic product (GDP) in nearly four years. After a setback in the first quarter, the Japanese economy returned to its path of growth, while in the United Kingdom the pace of expansion picked up distinctly. Euro area economic output, meanwhile, continued to increase at an unchanged moderate rate. The high level of growth in China also remained largely stable compared to its international peers.

Despite ongoing efforts to reach negotiated solutions, several trade policy conflicts escalated. However, this was probably not the main reason why sentiment in the manufacturing sector, while still fundamentally positive, has clouded over since the beginning of the year. Recent survey results have been less favourable, particularly among those economies which had benefited from particularly buoyant industrial activity in 2017. In those countries affected the most by trade-restrictive measures, the relevant purchasing managers’ indices barely budged. Nonetheless, an escalation of these disputes could weigh considerably on global economic growth.

European Central Bank (ECB)

Issue 6 - September 2019

Based on a thorough assessment of the economic and inflation outlook for the euro area, also taking into account the latest staff macroeconomic projections, the Governing Council took a number of decisions at its monetary policy meeting on 12 September in pursuit of its price stability objective. Incoming information since the last Governing Council meeting indicates a more protracted weakness of the euro area economy, the persistence of prominent downside risks and muted inflationary pressures. This is reflected in the September staff projections, which show a further downgrade of the inflation outlook. At the same time, robust employment growth and increasing wages continue to underpin the resilience of the euro area economy. Against this overall backdrop, the Governing Council announced a comprehensive package of monetary policy measures in response to the continued shortfall of inflation with respect to its aim.

Issue 5 - August 2019

Incoming information since the last Governing Council meeting in early June indicates that, while further employment gains and increasing wages continue to underpin the resilience of the economy, softening global growth dynamics and weak international trade are still weighing on the euro area outlook. Moreover, the prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets, is dampening economic sentiment, notably in the manufacturing sector. In this environment, inflationary pressures remain muted and indicators of inflation expectations have declined. Therefore, a significant degree of monetary stimulus continues to be necessary to ensure that financial conditions remain very favourable and support the euro area expansion, the ongoing build-up of domestic price pressures and, thus, headline inflation developments over the medium term. Accordingly, the Governing Council adjusted its forward guidance on policy interest rates and underlined its determination to act if the medium-term inflation outlook continues to fall short of its aim.

Issue 4 - June 2019

Based on a thorough assessment of the economic and inflation outlook for the euro area, also taking into account the latest staff macroeconomic projections, the Governing Council took a series of monetary policy decisions at its monetary policy meeting on 6 June to support the convergence of inflation towards levels of below, but close to, 2%.
Despite the somewhat better than expected data for the first quarter, the most recent information indicates that global headwinds continue to weigh on the euro area outlook. The prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets, is leaving its mark on economic sentiment. At the same time, further employment gains and increasing wages continue to underpin the resilience of the euro area economy and gradually rising inflation. Against this overall background, the Governing Council decided to keep the key ECB interest rates unchanged and adjust its forward guidance on the key ECB rates to indicate its expectation that they will remain at their present levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term. It also reiterated its forward guidance on reinvestments. And, finally, it decided upon the modalities of the new series of quarterly targeted longer-term refinancing operations (TLTRO III), most notably their pricing parameters. The Governing Council also assessed that, at this point in time, the positive contribution of negative interest rates to the accommodative monetary policy stance and to the sustained convergence of inflation is not undermined by possible side effects on bank-based intermediation. However, the Governing Council will continue to monitor carefully the bank-based transmission channel of monetary policy and the case for mitigating measures.

Issue 3 - April 2019

The information that has become available since the Governing Council’s monetary policy meeting in March confirms slower growth momentum extending into the current year. While there are signs that some of the idiosyncratic domestic factors dampening growth are fading, global headwinds continue to weigh on euro area growth developments. The risks surrounding the euro area growth outlook remain tilted to the downside, on account of the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets. At the same time, further employment gains and rising wages continue to underpin the resilience of the domestic economy and gradually rising inflation pressures. However, an ample degree of monetary accommodation remains necessary to safeguard favourable financing conditions and support the economic expansion, and thus to ensure that inflation remains on a sustained path towards levels that are below, but close to, 2% over the medium term. Significant monetary policy stimulus is being provided by the Governing Council’s forward guidance on the key ECB interest rates, reinforced by the reinvestments of the sizeable stock of acquired assets and the new series of targeted longer-term refinancing operations (TLTROs).

Survey indicators of global economic activity have weakened in the first quarter of 2019. In particular, global trade has continued to slow down amid the turning of the global industrial cycle and heightened trade tensions. Global inflation has subsided in the first months of this year, largely on account of a lower contribution from the energy component.

Issue 2 - March 2019

Based on a thorough assessment of the economic and inflation outlook, the Governing Council took a series of monetary policy decisions at its monetary policy meeting on 7 March.

The weakening in economic data points to a sizeable moderation in the pace of the economic expansion that will extend into the current year, even though there are signs that some of the idiosyncratic domestic factors dampening growth are starting to fade. The persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets appears to be leaving marks on economic sentiment. Moreover, underlying inflation continues to be muted. The weaker economic momentum is slowing the adjustment of inflation towards the Governing Council’s aim. At the same time, supportive financing conditions, favourable labour market dynamics and rising wage growth continue to underpin the euro area expansion and gradually rising inflation pressures. Against this background, the Governing Council decided to adjust its forward guidance on the key ECB interest rates to indicate its expectation that they will “remain at their present levels at least through the end of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term”, as well as to reiterate its forward guidance on reinvestments. Furthermore, the Governing Council decided to launch a new series of targeted longer-term refinancing operations (TLTRO-III) and to continue conducting all lending operations as fixed rate tender procedures with full allotment at least until the end of the reserve maintenance period starting in March 2021. These decisions were taken to ensure that inflation remains on a sustained path towards levels that are below, but close to, 2% over the medium term.

Issue 1 - February 2019

The incoming information that has become available since the Governing Council’s decision to end net asset purchases in December 2018 has continued to be weaker than expected on account of softer external demand and some country and sector-specific factors. In particular, the persistence of uncertainties relating to geopolitical factors and the threat of protectionism is weighing on economic sentiment.

At the same time, supportive financing conditions, favourable labour market dynamics and rising wage growth continue to underpin the euro area expansion and gradually rising inflation pressures. This underlying strength of the economy supports the Governing Council’s confidence in the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term. Nevertheless, significant monetary policy stimulus remains essential to support the further build-up of domestic price pressures and headline inflation developments over the medium term. This will be provided by the Governing Council’s forward guidance on the key ECB interest rates, reinforced by the reinvestments of the sizeable stock of acquired assets. The Governing Council confirmed that it stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the Governing Council’s inflation aim in a sustained manner.

Issue 8 - December 2018

At its monetary policy meeting on 13 December, the Governing Council decided to end the net asset purchases in December 2018, while keeping the key ECB interest rates unchanged and enhancing the forward guidance on reinvestment. While incoming information has been weaker than expected, reflecting softer external demand but also some country and sector-specific factors, the underlying strength of domestic demand continues to underpin the euro area expansion and gradually rising inflation pressures. This supports the Governing Council’s confidence that the sustained convergence of inflation to its aim will proceed and will be maintained even after the end of the net asset purchases. At the same time, uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility remain prominent. Therefore, significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term. The Governing Council’s forward guidance on the key ECB interest rates, reinforced by the reinvestments of the sizeable stock of acquired assets, continues to provide the necessary degree of monetary accommodation for the sustained convergence of inflation to its aim. In any event, the Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards its inflation aim in a sustained manner.
 

Issue 7 - November 2018

The incoming information that has become available since the Governing Council’s monetary policy meeting in September, while somewhat weaker than expected, remains overall consistent with an ongoing broad-based expansion of the euro area economy and gradually rising inflation pressures. The risks surrounding the euro area growth outlook can still be assessed as broadly balanced. At the same time, risks relating to protectionism, vulnerabilities in emerging markets and financial market volatility remain prominent. Yet, the underlying strength of the economy continues to support the Governing Council’s confidence that the sustained convergence of inflation to its aim will continue in the period ahead and will be maintained even after a gradual winding-down of the net asset purchases. Nevertheless, significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term. This support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by the Governing Council’s enhanced forward guidance on the key ECB interest rates. In any event, the Governing Council stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move towards its aim in a sustained manner.

Issue 6 - September 2018

At its monetary policy meeting on 13 September, the Governing Council concluded that the incoming information, including the September 2018 ECB staff projections, broadly confirms the Governing Council’s previous assessment of an ongoing broad-based expansion of the euro area economy and gradually rising inflation. The underlying strength of the economy continues to support the Governing Council’s confidence that the sustained convergence of inflation to its aim will proceed and will be maintained even after a gradual winding-down of the net asset purchases. At the same time, uncertainties relating to rising protectionism, vulnerabilities in emerging markets and financial market volatility have gained more prominence recently. Therefore, significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term. This support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by the Governing Council’s enhanced forward guidance on the key ECB interest rates. In any event, the Governing Council stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move towards its aim in a sustained manner.

Issue 5 - August 2018

The information that has become available since the Governing Council’s monetary policy meeting on 14 June indicates that the euro area economy is proceeding along a solid and broad-based growth path. 1 Uncertainties related to global factors, notably the threat of protectionism, remain prominent, and the risk of persistent heightened financial market volatility continues to warrant monitoring. However, the risks surrounding the euro area growth outlook can still be assessed as broadly balanced. The underlying strength of the economy has confirmed the Governing Council’s confidence that the sustained convergence of inflation to its aim will continue in the period ahead and will be maintained even after a gradual winding-down of the net asset purchases. Nevertheless, significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term. This support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by the Governing Council’s enhanced forward guidance on the key ECB interest rates. In any event, the Governing Council stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move towards its aim in a sustained manner.

Issue 4 - June 2018

At its monetary policy meeting on 14 June 2018, the Governing Council concluded that progress towards a sustained adjustment in inflation had been substantial so far. Since the start of its asset purchase programme (APP) in January 2015, the Governing Council has made net asset purchases under the APP conditional on the extent of progress towards a sustained adjustment in the path of inflation to levels below, but close to, 2% in the medium term. On 14 June 2018, the Governing Council undertook a careful review of the progress made, also taking into account the latest Eurosystem staff macroeconomic projections, measures of price and wage pressures, and uncertainties surrounding the inflation outlook. As a result of this assessment, the Governing Council concluded that progress towards a sustained adjustment in inflation has been substantial so far. With longer-term inflation expectations well anchored, the underlying strength of the euro area economy and the continuing ample degree of monetary accommodation provide grounds to be confident that the sustained convergence of inflation towards the Governing Council’s aim will continue in the period ahead, and will be maintained even after a gradual winding-down of its net asset purchases. The monetary policy decisions of 14 June 2018 maintain the current ample degree of monetary accommodation that will ensure the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term. Significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term. This support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by the Governing Council’s enhanced forward guidance on the key ECB interest rates. In any event, the Governing Council stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move towards the Governing Council’s inflation aim in a sustained manner.

Federal Ministry of Economics (BMWi)

August 2019

  • The German economy’s performance slowed slightly in the second quarter. The global economic environment including trade conflicts, Brexit and geopolitical crises is having a negative effect on international trade and the global economic development. This is affecting German industry. However, the domestic economy remains robust.
  • Output in the goods-producing sector declined in June. The quarterly comparison shows that all sectors have experienced losses. It shows that new orders in the manufacturing sector fell slightly again in spite of the increase seen in June.
  • The rising incomes of private households and fiscal policy stimuli continue to provide a boost to the economy.
  • The weaker economy is gradually affecting the labour market. The increase in employment is continuing at a slower pace while unemployment is stagnating at a low level.

July 2019

  • Industrial activity remains sluggish and there is noticeable headwind coming from foreign demand. Current data are also indicative of a calmer pace in the services sector. This suggests a weak underlying economic trend for the second quarter.
  • Industrial output rose moderately in May, while incoming orders in the manufacturing sector fell considerably. Likewise, the construction industry also recorded a noticeable decline.
  • The rising incomes of private households and fiscal policy stimuli are providing a boost to the economy.
  • The weaker economy is gradually affecting the labour market: growth in jobs is continuing at a slower pace. Unemployment figures stagnated in June.

June 2019

  • The German economy is facing headwinds from the global economic environment. Domestic economic activity remains strong, while export-oriented industry is experiencing a lean economic period. Following the significant growth in gross domestic product in the first quarter, the outlook for the second quarter currently remains subdued.
  • Industrial output fell sharply in April, while incoming orders in the manufacturing sector stabilised at a low level. In contrast, construction output continued to expand.
  • Bolstered by fiscal policy, incomes are rising, ensuring high consumer demand from private households.
  • The labour market is showing the first signs of the economic slowdown: Gainful employment continues to increase, but a slower rate of growth remains. Unemployment rose in May, which was not only due to special factors.

May 2019

  • The German economy grew significantly in the first quarter of 2019. The strong domestic economy stood firm in the face of the troubled global economic situation. Whilst added value expanded in the services sector, in some cases sharply, it declined in the goods-producing sector.
  • Industrial output softened slightly in the first quarter; new manufacturing orders weakened significantly. The economic prospects remain moderate here. In contrast, the construction output expanded.
  • Bolstered by fiscal policy, incomes are rising and ensuring brisk consumer demand from private households.
  • The labour market is also proving resilient. The number of people in work is continuing to rise and unemployment is falling. However, the level of dynamism is likely to weaken somewhat.

April 2019

  • Germany’s economy continues to display a mixed picture. Economic growth in the services sector and particularly the construction industry remains positive. Due to the slowing global economy, industry is experiencing a period of economic weakness. However, important domestic upward forces remain strong.
  • Industrial production fell slightly in February. New orders in the manufacturing sector, however, experienced a sharp decline. In contrast, the construction industry continues to report significant growth in production.
  • Bolstered by fiscal policy, incomes are rising sharply and ensuring brisk consumer demand from private households.
  • The number of people in work is continuing to rise and unemployment is falling. The dynamic growth in employment is also likely to weaken somewhat due to increasing shortages of skilled workers.


March 2019

  • Germany’s economy made a modest start to 2019. The economic development in Germany has entered more troubled waters due to increased risks and unknowns in the external economic environment.
  • The leading cyclical indicators remain restrained. However, solid domestic forces for growth and a fiscal boost are providing a stimulus at the beginning of the year.
  • Capacity utilisation remains above-average in the construction industry. The industrial sector cut back on production at the beginning of the year, and new orders, not least from abroad, were weak.
  • Bolstered by fiscal policy, incomes are rising sharply, and ensuring brisk consumer demand.
  • The number of people in work is continuing to rise, whilst the rate of fall in unemployment is likely to slow.

Stabilisation of Economy in Final Quarter of 2018

  • The leading cyclical indicators remain restrained. However, solid domestic forces for growth and a fiscal boost are providing a certain stimulus at the beginning of the year.
  • Industrial output stabilised at the end of 2018; in particular, car-making picked up speed. Order reserves are high, but the level of new orders has not improved recently. The boom in the construction sector is continuing.
  • Bolstered by fiscal policy, incomes are rising sharply, and ensuring brisk consumer demand.
  • The number of people in work is continuing to rise and unemployment is falling further.

Summary of 2018

  • The Federal Statistical Office announced today that Germany’s economy grew by 1.5% last year. This is weaker than had originally been expected, but is a sound result that shows that the Germany economy is still growing.
  • Reasons for the weaker growth include a slower global economy, low water levels due to the long drought, the sales problems of the automotive industry due to the WLTP problem, and other special factors like the wave of influenza and strikes. In arithmetical terms, the domestic economy was the main driving force.
  • However, the special factor of the WLTP issue is gradually fading away, and the new year is bringing an additional stimulus from the implementation of the coalition agreement, e.g. with cuts to taxes and charges, and building-related child benefit. Growth will therefore continue this year.
  • Despite a slight softening of new orders, the order reserves are still very large. The construction industry is booming.
  • Income levels are rising, as is consumer spending.
  • The number of people in work is continuing to rise and unemployment is falling further.
  • The Federal Ministry for Economic Affairs and Energy today hosted the 85th Konjunkturrat für die öffentliche Hand (a government economic advisory council). The main focus of the meeting is generally on the current economic situation in Germany and the Federal Government’s economic strategy. This year also saw a detailed discussion of the effects of protectionist trade policies on growth and economic activity.

November 2018

  • Special effects interrupt upswing in third quarter. Cause was the WLTP problem in the automotive industry. As these special effects disappear, the upswing of the German economy will resume.
  • Output in the goods-producing sector declined in the third quarter, particularly due to this special effect. In the last two months, new orders in the manufacturing sector have been rising again, and the level of orders on the books remains very high. The construction industry is booming.
  • Incomes and consumer demand are continuing to trend upwards. Retail sentiment is also good.
  • The positive developments in terms of employment and unemployment are continuing. Structural problems on the labour market are still posing challenges

October 2018

  • The upswing is continuing. In its autumn projection, the German government expects an increase in GDP of 1.8% in both this and next year.
  • In the current quarter, the output of the goods-producing sector is negatively impacted by special factors. Following two weak months, new orders in the manufacturing sector are rising, and the level of orders on the books remains very high. The construction industry is booming.
  • Incomes and consumer demand are continuing to trend upwards. Retail sentiment is also good.
  • Employment is continuing its powerful rise, and unemployment is falling significantly. However, structural problems on the labour market are posing challenges.

September 2018

  • Despite weak global trade and external economic uncertainties, the German economy is proving solid. The upturn is mainly being driven at present by the domestic upward forces.
  • Output in the goods-producing sector is slow at the beginning of the third quarter, with special factors playing a role. New orders in the manufacturing sector are also down, but the level of orders on the books remains very high. The construction industry is booming.
  • Employment, incomes and consumer demand are continuing to trend upwards. Retail sentiment is also good.
  • The number of people in work is continuing to rise and unemployment is falling. However, structural challenges exist, such as a reduction in long-term unemployment and the response to structural change.

August 2018

  • Despite external economic uncertainties, the German economy is proving to be robust. The expansion is continuing at a slightly faster rate in the wake of a stimulus from the domestic economy and higher investment activity in the second quarter.
  • Output in the goods-producing sector was higher in the second quarter than in the preceding three months. New orders in the manufacturing sector did decline, but the level of orders on the books remains very high. The construction industry is booming.
  • Employment, incomes and consumer demand are continuing to trend upwards. Sentiment in the retail sector is good, but expectations have been significantly corrected.
  • The level of gainful activity is increasing across much of the economy. Unemployment is trending further downwards. The need to boost structurally weak areas and to cut long-term unemployment continues to present challenges.

Center for Economic Studies - Joint Economic Forecast

Spring 2019

The long-running upswing in the German economy came to an end last year. In the summer of 2018, it still seemed as if this would be only a temporary dip related to production difficulties in key German industries. The causes of these difficulties included problems in the automotive industry with the certification of new cars according to the new WLTP exhaust emission procedure, and a prolonged low water level on German waterways. However, the global economy also cooled down over the course of the past year.

Autumn 2018

The economic upturn in Germany is entering its sixth year, but is losing momentum. This is due to both demand and supply side factors. On the one hand, Germany’s key sales markets have weakened in line with the slowdown in world trade. On the other hand, a growing number of companies are apparently facing production-side bottlenecks, especially in terms of labour and sourcing intermediate goods. This overlaps with problems in the automotive industry related to the introduction of the new World Harmonised Light Vehicle Test Procedure (WLTP)...

Spring 2018

Strong growth in the German economy will continue in the months ahead. The ifo Institute expects real gross domestic product to increase by 2.6% this year, with the pace of growth slowing down to 2.1% in 2019. This falls into line with the ifo Institute’s winter 2017 forecast.

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