Tuesday, February 20, 2018

Germany - German economy is booming - Industry remains key driving force - Report Bundesbank..


Press Release - 19.02.2018 - German economy booming

According to Bundesbank estimates, the German economy is booming. The latest issue of the Monthly Report states that aggregate economic performance surpassed potential output by a considerable margin in the first three quarters of 2017. Economic output also saw large gains in the last quarter, although with slightly less momentum than before. 


According to the Federal Statistical Office’s initial estimates, real gross domestic product (GDP) increased by 0.6% in this period against the third quarter after adjustment for seasonal and calendar variations. In 2017 as a whole, real GDP grew by 2.5% in calendar-adjusted terms.

According to the Monthly Report, aggregate capacity utilisation has meanwhile significantly exceeded its long-term average. Sentiment is extraordinarily good amongst enterprises and households alike, and the situation on the labour market has improved even further, the Bundesbank’s experts report.

Industry remains key driving force

In the final quarter of 2017, industry continued to play its role as the main driving force of the upswing. According to the experts, business-related service sectors are also likely to have maintained their dynamic upwards movement in its wake. On the other hand, the construction sector, which has been facing considerable capacity shortages for some time, was unable to increase production any further.

Strong economic growth continues

The Bundesbank’s experts estimate that the high average pace of expansion achieved in the course of 2017 will continue into the first quarter of the new year. Given the burgeoning order books, the industrial sector probably remains the driving force behind the upturn. In its most recent forecast of December 2017, the Bundesbank had again anticipated calendar-adjusted GDP growth of 2.5% in 2018. It expects the German economy to expand by 1.9% in 2019 and by 1.5% in 2020.

Economists estimate that the continuing very high level of utilisation of tangible assets in manufacturing is likely to mean that enterprises’ willingness to invest in new machinery and equipment will increase further. "However, there are mounting signs that the German economy is increasingly facing capacity shortages, which could stand in the way of significantly stronger growth," they warn. The Ifo Institute believes that this would lead to a rising number of businesses reporting production stoppages due to shortages of skilled workers. This could gradually restrict output growth.

Situation on labour market extremely favourable 

According to the Bundesbank’s estimates, Germany’s labour market was again in excellent shape in the fourth quarter of 2017. As in the preceding quarters, employment rose sharply. The number of job vacancies also continued to grow during the fourth quarter. According to other leading indicators, too, the outlook for the next few months remains upbeat. Nonetheless, the experts believe that it may become more difficult to fill vacant positions given the currently high demand for labour.


Broadly based upswing in euro area

The Bundesbank observes that growth in the euro area remains buoyant as well. According to Eurostat’s initial estimate, real GDPin the fourth quarter of 2017 rose by 0.6% on the quarter after seasonal adjustment. Real GDP is likely to have risen by 2.5% on average in 2017. The brighter external environment, which gave a noticeable boost to exports, did much to put the economy on a faster growth path, the Bundesbank reports. The Bundesbank’s experts believe that the continually positive sentiment indicators suggest that the broadly based economic upswing in the euro area will continue.

Global economic activity also remained brisk at the end of 2017, according to the Bundesbank’s estimation. Following its rapid pace in the second and third quarters, economic growth in the industrial countries slowed only slightly in the final quarter of the year. Current indicators suggest that global economic activity also had a buoyant start to 2018, as described in the Monthly Report.


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Copyright: Deutsche Bundesbank, Frankfurt am Main, Germany"