Ger­man growth fore­casts up­graded for 2015, 2016

The China Post - - WORLD BUSINESS -

Eco­nomic growth in Ger­many has picked up faster than ex­pected thanks to low un­em­ploy­ment, higher wages and the weak euro, rais­ing fore­casts for the com­ing years, the Ger­man cen­tral bank, or Bun­des­bank, said on Fri­day.

The Ger­man econ­omy, Europe’s big­gest, was pro­jected to ex­pand by 1.7 per­cent in 2015, 1.8 per­cent in 2016 and 1.5 per­cent in 2017, the Bun­des­bank said.

That marked an “ap­pre­cia­ble” up­grade from the cen­tral bank’s pre­vi­ous eco­nomic pro­jec­tions in De­cem­ber, when it had pen­ciled in growth of 1.0 per­cent for this year and 1.6 per­cent for next year.

With those growth rates, “the Ger­man econ­omy would ex­pand at a faster pace than po­ten­tial out­put at an an­nual rate of 1.2 per­cent and ag­gre­gate ca­pac­ity utilisation would greatly ex­ceed the multi-year av­er­age at the end of the fore­cast hori­zon,” the Bun­des­bank wrote.

“Com­pared with the De­cem­ber pro­jec­tion, GDP growth ex­pec­ta­tions for 2015 and 2016 have been raised ap­pre­cia­bly by 0.7 and 0.2 per­cent­age point, re­spec­tively. This is pri­mar­ily a re­sult of the changed un­der­ly­ing con­di­tions, which al­ready pos­i­tively in­flu­enced the fourth quar­ter of 2014 and the first quar­ter of 2015,” it said.

The Ger­man econ­omy ef­fec­tively ground to a halt in the mid­dle of last year, but picked up again at year’s end to show growth of 0.7 per­cent in the fi­nal quar­ter and ex­pan­sion of 0.3 per­cent in the first three months of this year.

Re­cov­ered from Lull

“The Ger­man econ­omy has re­cov­ered from the lull in mid-2014 more quickly than ex­pected and has re­turned to a path of growth that is sup­ported by both in­ter­nal and ex­ter­nal de­mand,” the Bun­des­bank said.

“The do­mes­tic econ­omy is no­tably reap­ing the benefits of the fa­vor­able la­bor mar­ket sit­u­a­tion and sub­stan­tial in­come growth. This is hav­ing an ef­fect on pri­vate con­sump­tion as well as on hous­ing con­struc­tion,” it wrote.

While for­eign busi­ness was cur­rently bur­dened by “damp­en­ing ef­fects em­a­nat­ing from the global econ­omy ... this is bal­anced out by the de­pre­ci­a­tion of the euro and the im­prov­ing eco­nomic re­cov­ery in the euro area,” it con­tin­ued.

“More­over, the global econ­omy is likely to pick up steam again in the near fu­ture,” the Bun­des­bank added.

The promis­ing over­all sce­nario was re­flected in pos­i­tive senti- ment, it con­tin­ued.

“En­ter­prises still con­sider their sit­u­a­tion to be ex­cep­tion­ally good,” it said.

Ac­cord­ing to the sur­vey pub­lished by the Ger­man Cham­ber of Com­merce and In­dus­try (DIHK) in the early sum­mer, nine out of 10 firms were “at least con­tent” with their sit­u­a­tion.

Other lead­ing sen­ti­ment sur­veys, such as Ifo and the Cen­tre for Euro­pean Eco­nomic Re­search, painted a sim­i­lar pic­ture.

“Firms are also look­ing to the fu­ture with a fair amount of con­fi­dence. That said, their sense of op­ti­mism is not as pro­nounced as it was at the be­gin­ning of last year. Ac­cord­ing to the DIHK, sen­ti­ment is clouded by fears con­cern­ing Ger­many’s eco­nomic pol­icy frame­work, la­bor costs and the la­bor sup­ply,” the Bun­des­bank cau­tioned.

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