The German economy is growing dynamically. In the third quarter, economic output (GDP) grew by 0.8 % after adjustment for price, seasonal and the number of calendar days. Growth during the first semester exceeded the figures shown in the official statistics so far. The figures for the whole of 2017 can be expected to be strong.  In Q3, exports grew faster than imports, resulting in a positive external position of 0.4 percentage points. As utilisation rates of productive capacities are high and loans available at low interest rates, private investment in machinery and equipment is growing, up 2.8 % over the third quarter. In addition to this, additional inventories have been created. Private consumption, which had been the main driver of growth over the past few years, flatlined for the moment (-0.1 %). Employment continued to grow at nearly the same speed as before and incomes also saw another increase in Q3. Altogether, the positive economic development can be expected to continue through to the end of the year. However, industrial output may well turn out to have fallen in Q4. This, however, would not change the fact that the overall cyclical trend is very positive. The sentiment indicators, which are also showing very positive signals, are consistent with this view.
The global economy has continued to pick up speed over the course of this year. Global industrial output rose again in September, in line with the positive trend that had established itself. Between September 2016 and September 2017, industrial output expanded by 3.9%. The global indicators of sentiment suggest that there is growing confidence in the world economy. The dynamic cyclical development observed in the industrialised countries continued in Q3. GDP in the eurozone grew by 0.6%, by 0.8% in the United States and by 0.6% in Japan. Among the emerging economies, China saw more constant economic development. Russia and Brazil left their recessions behind. Overall, global economic growth in 2017 is expected to be higher than last year. Based on its figures from November, the OECD is now expecting the global economy to grow by 3.6% in 2017.
According to balance-of-payments statistics from the Bundesbank, Germany’s exports of goods and services in October 2017 rose slightly by 0.2% in current prices, compared to the preceding month. The comparison over three months, which is less susceptible to fluctuations, shows a +0.9% increase. Imports expanded by 1.9 % in October. Over the entire quarter, imports grew by 0.7%, which is slightly less than the comparative figure for exports. Germany’s cumulated current account surplus continues to be lower than that of 2016 at this time of the year. Following two months of weaker exports, the national indicators on foreign trade and investment and the global economic recovery now suggest that German exports are likely to grow again.
Almost all parts of the industrial sector are seeing a dynamic development. After a very strong rise in industrial rise in Q3 (+3.7%), there was another 0.5% increase in October. This also means that companies’ order books are rather full. The business climate is excellent, which suggests that the positive trend is likely to continue. Summer holidays that came late in the year and a large number of days taken off in September and October by employees to bridge the gap between a bank holiday and the weekend were one of the main reasons why industrial output fell during these two months. This also means that Q4 is not likely to be particularly strong on growth. Since Q3, output in the construction sector has been flatlining at best – despite a positive environment for construction and strong demand. Even so, however, output from the sector (adjusted for the number of working days) was more than four per cent higher this year in October than in the preceding year. One of the main reasons for the weakening of growth this year is probably the fact that the construction industry is operating at near-full capacity and having difficulty recruiting new workers.
On the back of rising incomes and employment levels, private consumption has been the main driver of domestic demand and a long upswing. For the first time since Q4 of 2013, private consumption was on a decline, going back slightly by 0.1% in Q3 of this year. This is also reflected in the fact that retail turnover had a rocky start to Q4 at -1.2%, after being close to stagnation (+0.2%) in Q3. This contrasts with the retail figures for car dealerships, which continued to rise in Q3. The inflation rate for November was 1.8%. With incomes and employment levels on the increase, a positive consumer climate, and the ifo business climate index for retailers also remaining at a high level, there is everything to suggest that private spending on consumption will continue to rise.
The situation on the job market remains positive. Gainful activity continues to be on the rise, albeit a little more slowly than in last year’s winter semester. In October, the figure grew by 41,000 people (after adjustment for seasonal effects). Year-on-year, the increase totted up to 650,000. Employment subject to social security contributions (after adjustment for seasonal effects) rose by 35,000 persons in September. The leading indicators published by the Federal Employment Agency, ifo Institute, and the Institute for Employment Research all suggest that demand for labour is set to remain at a high level across many different sectors. Unemployment and underemployment both fell in November, by 18,000 and 21,000 persons respectively (after adjustment for seasonal effects). According to the unadjusted figures, unemployment dropped to 2.37 million, which is the lowest figure ever to be recorded in post-reunification Germany. The unemployment rate is set to continue to fall, albeit perhaps a little more slowly. This is on account of the fact that migrants entering the job market after completing their integration and language classes tend to need some time before they find employment. Other challenges that continue to need addressing are the rate of atypical employment (usually in the low-wage bracket), long-term unemployment and the fact that joblessness is more prevalent in regions that are structurally weak.