Domestic Demand in Germany
Germany - Domestic Demand
Economy contracts for the first time in over three years
A flash release by the Federal Statistics Office (Destatis) on 14 November showed that the German economy shrank for the first time since Q1 2015 and at the fastest pace since the first quarter of 2013. On a seasonally-, calendar- and price-adjusted basis, the economy contracted 0.2% over the previous quarter in the third quarter, contrasting the 0.5% expansion in the April–June quarter. The result reflected a weakening external sector and softening domestic demand. On a year-on-year basis, the German economy expanded 1.1%, which was markedly down from the previous quarter’s 2.3% increase.
Domestic demand in the quarter was primarily driven by fixed investment, particularly in machinery and equipment, and construction. Meanwhile, growth in government consumption inched up. More worrisome was the decrease in private consumption despite the unemployment rate dropping to a new post-reunification low in September, higher wages and still-elevated consumer confidence. On the external front, exports growth was down in the quarter while import growth picked up. Subsequently, the external sector dragged on the economy. According to Carsten Brzeski, chief economist at ING: “The poor export performance, despite a weak euro exchange rate, suggests that trade tensions and weakness in emerging markets could continue to weigh on Germany’s growth performance.”
The economy should rebound going forward, and Germany is expected to record another year of robust growth this year and next. Domestic demand will likely remain buoyant and could receive a boost from the increases to the minimum wage in January 2019 and 2020. As summarized by Dr. Andreas Rees, chief German economist at UniCredit: “In light of sound fundamentals [...] there cannot be any doubt that is mere volatility […] To cut a long story short, a rebound in the fourth quarter is a done deal.” A possible escalation in trade tensions between the European Union and the United States, however, darkens the outlook, as does a full-blown trade war between the U.S. and China. Moreover, on the domestic front, the state elections in Bavaria and Hesse could increase tensions within the “grand coalition”.
A detailed breakdown of national accounts components will be available on 23 November.
Germany GDP Forecast
Met the why particular Consensus Forecast panelists see the economy expanding 1.8% in 2019, which is unchanged from last month’s forecast. For 2020, the panel forecasts GDP growth of 1.6%.
Germany - Domestic Demand Data
|Domestic Demand (annual variation in %)||0.9||1.3||1.6||2.4||2.2|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||0.41||0.41 %||Nov 13|
|Exchange Rate||1.13||0.65 %||Nov 13|
|Stock Market||11,472||-0.41 %||Nov 13|
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November 14, 2018
A flash release by the Federal Statistics Office (Destatis) on 14 November showed that the German economy shrank for the first time since Q1 2015 and at the fastest pace since the first quarter of 2013.
November 13, 2018
In October, consumer prices rose 0.2% over the prior month, down from September’s 0.4% increase.
November 8, 2018
September trade data proved underwhelmingly, as exports contracted for the fourth time in the last six months, falling 0.8% month-on-month.
November 7, 2018
Industrial production expanded 0.2% over the previous month in September in seasonally-, price- and working-day adjusted terms.
October 26, 2018
The forward-looking GfK Group Consumer confidence indicator is expected to remain stable at 11.6 points in November, reflecting a mixed mood in backward-looking underlying confidence indicators for October that are released simultaneously.