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Subdued industry outlook dampens wage growth

October 28, 2016
Region:
German wage growth slowed in H1 2016 and there is a range of factors that are likely to also put a lid on the pick-up in 2017. The impact of labour shortage is limited by material mismatch between the qualifications of the unemployed and those sought by employers as well as substantial immigration flows. High real wage gains have pushed up unit labour costs and weighed on corporate profitability, which is further undermined by low productivity growth. Cautious wage agreements in 2016 on average stipulate only 2% wage increases in 2017. Despite a 4% increase in the statutory minimum wage, aggregate wages should increase by only around 2 ½%. According to our forecasts, next year could see the growth rate for industrial production in Germany drop to 0.5% in real terms. Regarding output in Germany’s large industrial sectors we do not expect major outliers. Also in this issue: “The View from Berlin. All lights on the debates about personalities and tactical gambits.” [more]

More documents from Heiko Peters

40 (37-40)
July 31, 2013
Region:
37
In this issue we look at two structural aspects of the German economy which provide speed limiters for GDP growth. The first is the interplay of foreign and domestic demand with implications for the current cyclical forecast. The second is the demographic implications for German labour supply which will be the biggest bottleneck for the economy’s long term growth potential. [more]
July 1, 2013
Region:
38
The findings of the latest Pew Research Center survey paint an impressive picture of the economic divergences within the euro area. The share of respondents in Germany assessing the current situation as “good”, for instance, has risen from 63% in 2007 to 75% currently, while this share has slumped heavily in all other European countries included in the survey. [more]
April 30, 2013
Region:
39
Over the past few days sentiment has brightened considerably in Germany, and there are even signs of euphoria in some places – Munich and Dortmund in particular. But unlike Germany's two Champions League semi-finalists the economic releases of late have been a sobering disappointment following the encouraging data at the start of the year. For this reason we have slightly lifted our forecast for German Q1 GDP growth from 0.1% qoq to 0.3%. At the same time, though, we cut our expectations for Q2 from 0.4% to 0.2%. On balance this leaves the annual average unchanged at 0.3%. [more]
March 1, 2013
Region:
40
There is much to suggest that the economy returned to a growth path – albeit only a modest one – in the first quarter after a 0.6% contraction of real GDP in the closing quarter of 2012. New order intake and industrial output had already begun to pick up in December, so there was a growth overhang in production from the outset in Q1. Besides, business sentiment had already started to brighten four months ago. [more]
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