Germany Economic Forecast

Germany Economic Outlook

December 20, 2018

Annegret Kramp-Karrenbauer was elected the new chief of Germany’s Christian Democrats (CDU) on 7 December, replacing Chancellor Angela Merkel as analysts question whether the economy is beginning to show signs of a prolonged loss of steam, or is simply being negatively affected by a conflux of one-off factors. In the third quarter, the economy shrunk for the first time in over two years on the back of weakening domestic demand and a contraction in exports. Additionally, the automotive sector struggled due to new emission regulations, dealing a blow to the economy. Data from the fourth quarter of this year paints a somewhat grim picture. The composite PMI averaged significantly lower in October-November than in the third quarter, while consumer confidence is expected to ease further in December to its lowest level since June 2017. Although business confidence remained in optimistic territory, it moderated for the third consecutive month in December. However, the unemployment rate continued to fall in the same month, while retail sales grew at the strongest clip in over a year in October.

Germany Economic Growth

Solid domestic demand driven by a pick-up in public and private expenditure growth should buttress economic activity in 2019. Private consumption will likely benefit from the minimum wage increase from 1 January and a tight labor market. However, uncertainty surrounding Brexit and trade tensions between the EU and the United States cloud the outlook. FocusEconomics Consensus Forecast panelists expect the economy to expand 1.6% in 2019, down 0.1 percentage points from last month’s forecast, and 1.5% in 2020.

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Germany Facts

Bond Yield0.170.41 %Jan 16
Exchange Rate1.140.65 %Jan 16
Stock Market10,931-0.41 %Jan 16

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