Germany Economic Forecast

Germany Economic Outlook

September 25, 2018

Following an acceleration in the second quarter, monthly data suggests that the economy continues to perform solidly in the third quarter. The average composite PMI reading in the first two months of Q3 trended above the average figure for the previous quarter. Moreover, sentiment among consumers remained elevated through September while business sentiment edged up in August. On the other hand, in July industrial production contracted sharply month-on-month despite a strong rebound from the construction sector. In addition, exports fell, and the trade surplus narrowed to a multi-year low amid resilient import growth. On the political front, next month’s state elections in Bavaria will worry the Christian Social Union—aligned with Chancellor Merkel’s CDU—which could lose its absolute majority in the southern state. Such a result could heighten tensions in the federal government’s governing coalition.

Germany Economic Growth

Domestic demand should continue bolstering economic growth in the second half of this year and next year. Above-inflation pay rises are likely to support household consumption while a raise in the minimum wage next year—when ratified by the government later this year—should stimulate private consumption further. A no-deal Brexit and a possible escalation of trade tensions between the EU and the U.S., Germany’s biggest export market, pose downside risks to the outlook, however. Met the why particular Consensus Forecast panelists expect the economy to expand 2.0% in 2018 and 1.8% in 2019, unchanged from last month’s forecast.

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Germany Facts

Bond Yield0.490.41 %Oct 16
Exchange Rate1.160.65 %Oct 16
Stock Market11,777-0.41 %Oct 16

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