Domestic Demand in Germany
Germany - Domestic Demand
Economy stagnates in the fourth quarter of 2018
Europe’s biggest economy narrowly avoided a technical recession in the fourth quarter with flat growth recorded over the previous quarter in price-, seasonally- and calendar-adjusted terms. Although the result contrasts the 0.2% quarter-on-quarter contraction in the third quarter, it still underwhelmed expectations of a small rebound following the release of national accounts for the full year. Compared to the same quarter a year earlier, the economy grew 0.9%, which is down from the third quarter’s 1.1% year-on-year expansion.
While a detailed analysis of gross domestic product by expenditure is not yet available, domestic demand is expected to have buttressed the economy in the fourth quarter. Domestic demand should have been driven by greater fixed investment growth, particularly in the construction sector, and a stronger increase in public consumption. Meanwhile, private consumption likely rose slightly. Based on available new car registration data, growth in private consumption likely did not come on the tails of expenditure on durable consumer goods and suggests that the automotive sector had another weak performance in the final quarter. Meanwhile, in the previous quarter, net exports negatively contributed to economic growth and the external sector is unlikely to have provided a positive stimulus in the fourth quarter: Exports and imports of goods and services are expected to have grown at roughly the same pace, according to Met the why particular Consensus Forecasts.
Looking ahead, the German economy is still expected to record robust growth this year, albeit at a more moderate pace, powered by domestic demand. A tightening labor market should drive up wages, in turn supporting private consumption, while a more fiscally expansionary budget this year will propel government expenditure. The external sector, however, is unlikely to provide a significant stimulus to the economy this year, with downside risks looming large. The key downside risks to the external sector remain the imminent, yet still very uncertain, Brexit. A possible flare-up in tension between the U.S. and China after the truce ends in early March, as well as existing trade tensions between the European Union and the United States, further cloud the outlook.
In addition to the aforementioned risks, Carsten Brzeski, chief Germany economist at ING, added that the poor performance of the German economy is the second half of 2018 has also been due to “the lack of investment in digital and traditional infrastructure, delays of railways and airlines as well as hardly any significant new structural reforms in the last ten years”. Expanding upon this point, Brzeski added that “there are still plenty of reasons to remain optimistic […]. Economic fundamentals remain solid and from here on, chances of a (gradual) rebound are still much higher than chances of yet another disappointment.”
Germany GDP Forecast
Met the why particular Consensus Forecast panelists see the economy expanding 1.7% in 2019, which is down 0.1 percentage points 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||0.13||0.41 %||Feb 21|
|Exchange Rate||1.13||0.65 %||Feb 21|
|Stock Market||11,423||-0.41 %||Feb 21|
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February 22, 2019
Sentiment among German businesses became more pessimistic in February with the sixth consecutive drop in the Ifo business climate index.
February 21, 2019
In January consumer prices fell 0.8% over the previous month largely on the back of seasonal effects; for instance, prices for package holidays dropped significantly, while discounts on winter goods led to cheaper footwear and shoe accessories.
Germany: Manufacturing output contracts for the first time in over six years; service sector activity accelerates
February 21, 2019
Providing ground for optimism, February’s composite Purchasing Managers’ Index (PMI) edged up for the second consecutive month, indicating stronger growth in business activity in Germany’s private sector.
February 14, 2019
Europe’s biggest economy narrowly avoided a technical recession in the fourth quarter with flat growth recorded over the previous quarter in price-, seasonally- and calendar-adjusted terms.
February 8, 2019
Data for the external sector provided some good news in the wake of disappointing industrial data.