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2% GDP growth in 2015 despite adverse employment policy

February 28, 2014
Region:
The details of the 0.4% qoq GDP increase released this week have not altered our GDP forecast of 1.5% for 2014. If anything, they have added to our suspicion that current surveys (corporate and consumer) might paint a too rosy picture. However, we have turned somewhat more optimistic with regard to 2015, increasing our GDP forecast from 1.4% to 2.0%. [more]

More documents from Stefan Schneider

108 (85-96)
December 2, 2014
Region:
85
Underlying growth of the German economy has slowed in Q3. After average quarterly growth rates of over 0.3% qoq in the last 1 ½ years, GDP expanded just 0.1% in Q3. We expect about stagnation in the next two quarters with a risk of a negative print as sentiment has weakened further in October/November. The little momentum of global trade since 2012 points towards structural changes, which will affect German exports in particular. German export growth should therefore remain relatively muted during the next few years. We forecast average real German export growth at the lower end of a range of 4%-6% between 2014 and 2019, which should be buttressed by a depreciation of the euro. [more]
November 5, 2014
Region:
86
We have cut our German GDP growth forecast from 1.5% to 1.3% for 2014 and further from 1.5% to 0.8% for 2015. We do not see Germany falling into a technical recession in Q3. But the 6 month slump of the ifo index has increased the risk that we might see a negative GDP print in Q4 2014 or Q1 2015. The positive effect of weaker oil prices will be offset by wage growth slowing from 3% plus this year towards 2% in 2015, as export-orientated sectors will respond to weaker external demand. Further topics in this issue: German industry: Temporary slowdown; German construction: Robust investment, but price momentum slowing; Inheritance tax: Constitutional Court ruling likely to weigh harder on business heirs; 25 years after the fall of the Berlin Wall: "Blooming landscapes" only in part. [more]
October 29, 2014
Region:
87
Why are German wages/inflation not responding? Much of the answer lies in cultural factors and personal traits which manifest themselves in a high aversion to inflation. This in turn has led to Germany’s unique economic fundamentals and institutions. At the core it seems that Germans and German society can handle distribution conflicts involving time inconsistency problems better, on average, than many other nations. Given the German peculiarities the ECB has more time to run its supportive policy without creating new imbalances in the largest EMU economy. Therefore the ECB has scope to extend its balance sheet via private and most likely public QE. [more]
September 30, 2014
Region:
88
The recent positive surprises provided by real economic indicators have for now banished concerns that Germany might slide into recession in Q3. However, the ongoing geopolitical risks and the question marks hanging over the expected cyclical upturn will probably lead to weaker growth in exports and company investment. That is why we have scaled back our growth forecast for the winter half-year 2014/2015. Thus, we have lowered our forecast from 1.8% to 1.5%. In our current issue we also address Germany’s fiscal position, we analyse the consequences of potential Russian gas supply disruptions and we take a look at the investment behaviour of German households. [more]
September 2, 2014
Region:
89
German GDP only 1 ½% in 2014, considerable risks for 2015. We have scaled back our GDP forecast for 2014 from 1.8% to 1 ½%, as we now expect weaker growth in H2. This also reduces our forecast for 2015 from 2.0% to 1.8%. The risks that this still constitutes an overly optimistic forecast have increased significantly. The German investment cycle will likely be more subdued than expected due to the ongoing weakness of world trade and increasing geopolitical strains. Even the hitherto still robust private consumption is emitting its first warning signs. [more]
August 4, 2014
Region:
90
Economic growth probably suffered a worse setback in Q2 than initially presumed. We only expect stagnation now, but would no longer rule out a minimal decline. All in all, global economic conditions do not point to dynamic growth in H2. In particular, the tougher sanctions on Russia and the risk of further escalation of the conflict are set to weigh on business sentiment and investment activity in spite of Russia's low share in German exports. The debate triggered by ECB and Bundesbank comments about higher wage increases in Germany is likely to have a similar impact, even though the substance of the statements is less spectacular, on closer inspection, than the media hype. As uncertainties abound we have decided to refrain for now from making a downward revision to our full-year forecast of 1.8% GDP growth. [more]
June 4, 2014
Region:
91
With the dream start into 2014 we have lifted our GDP forecast to 1.8% (from 1.5%). For 2015 we maintain our 2% call, as we expect that the only temporary increase in the sum of gross wages resulting from the introduction of the minimum wage will be offset by more cautious investment spending. [more]
May 16, 2014
92
So far the West has chosen a reluctant approach in its attempt to contain Russia’s encroachment in Ukraine, refraining from economically or financially meaningful sanctions. The Ukraine crisis and further sanctions will not be inconsequential for the profile of the European recovery, but when looking at the distribution of costs, it seems that the West can afford to be tough towards Moscow. Obviously, the economic cost would be higher if Russian supply of energy to the West was jeopardized, but this would come at a very high price for Russia itself. [more]
February 24, 2014
Region:
93
With the New Year came a new Hollande pledging to build a New France. Still, most of the announcements made in January by the French President merely confirmed a prudent policy inflexion which started last year. Hollande is counting on the solemnity of the speech, putting economic reforms more firmly on the French political agenda. But the reforms are likely to be slow, and the transition will be costly in terms of growth. This will weaken France's reserves of political energy for European reform for many years. Actually, the structural hurdles to reform are more firmly entrenched in France than in Germany 10 years ago. Thus the adjustment is likely to be slower to yield any meaningful results on potential growth than in the German experience and a meaningful structural re-convergence of the two countries will be slow. [more]
January 27, 2014
Region:
94
We see economic growth in the order of 1.5% this year. Continuously strong private consumption and a rise in investment in machinery and equipment for the first time in two years are expected to lay the foundation for this solid performance. Moreover, we expect net exports to rise slightly as well in light of a global economic recovery. The labour market will remain a fundamental pillar of domestic demand also in 2014. With oil prices still relatively stable and tame domestic price developments, we expect the rate of inflation to come in at roughly the pre-year level of 1.5% on average in 2014. After a nearly balanced public-sector budget in 2013 a slight surplus seems to be in store for 2014, and public debt will likely fall in the direction of 76% of GDP, down from 81% at the end of 2012. [more]
December 12, 2013
Region:
95
International criticism of Germany’s current account surpluses has reached new heights. The persistent surpluses are often seen as worsening, if not causing, the European crisis by impairing the peripherals’ capacity to export. Still, even taken individually, most arguments put forward do not hold water. As there is little evidence that Germany is manipulating relevant parameters, one should accept that the surpluses are the result of individual decisions of largely private agents in Germany and abroad. Politicians and commentators may be unhappy with the result, but they should not blame Germany. Rather, they ought to insist that the peripheral countries continue to improve their own competitiveness. Higher minimum wages and rising social security contributions will be a burden for the domestic economy in the medium term and hence weigh on import growth. [more]
November 29, 2013
Region:
96
The coalition intends to hugely increase pension benefits, introduce a minimum wage and increase public spending. There is as little provision for tax hikes (SPD campaign issues) as for tax relief (CDU and CSU pledges). Trend growth, in particular labour supply, will be weakened. Inefficiencies in energy policy will be inadequately addressed. The sustainability of public finances will be substantially reduced. [more]
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