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Topic - Economic Situation and Cyclical Development

Economic and Cyclical Development

Introduction

The German economy is experiencing a steady, broad-based upswing that is rooted in a solid domestic economy. Capacity utilisation levels are good, employment is at a record high, and consumer prices are stable. In 2017, the economy grew faster than at any time since 2011: GDP expanded by 2.2% (price-adjusted). Growth of 2.4% is expected for 2018.

Three times a year, the Federal Government submits a projection of the overall economic development in Germany under the lead responsibility of the Federal Ministry for Economic Affairs and Energy. The annual projection is published by the Federal Government each January as part of the Annual Economic Report. The spring and autumn projections serve as basis for the Working Party on Tax Revenue Forcasting to estimate the tax revenues. The budgets of the Federal Government, the Länder, municipalities and social insurance funds are based on the forecast key overall economic figures. Information provided by the European Union in the context of the Stability and Growth Pact is also based on these projections.

The Federal Government forecasts the economic development in the short term and in the medium term and the production potential. These estimates serve as basis for the calculation of the maximum annual net new borrowing in the context of the 'debt brake' under Articles 109 and 115 of the German Basic Law.

Selected key figures for macroeconomic trends in the Federal Republic of Germany [1]

2016 20172018
Percentage change on preceding year
Gross domestic product (GDP), output approach
GDP(real)
Total employment
Unemployment rate in % (Federal Employment Agency definition) [2]

1,9
1,3
6,1

2,2
1,5
5,7

2,4
1,1
5,3

GDP by expenditure (real)

Private consumption expenditure
Machinery and Equipment
Construction


2,1
2,2
2,7

2,0
3,5
2,6

1,9
5,0
2,8
Domestic demand2,42,22,3
Exports
Imports
External balance of goods and services (contribution to GDP growth) [3]
2,6
3,9
-0,3
4,7
5,2
0,2
5,3
5,8
0,2
Total gross wages and salaries per employee2,52,72,9

[1]Up to 2017 provisional results of the Federal Statistical Office; National Accounts Status: January 2018;
[2] In relation to the total labour force;
[3] Absolute change (stocks/external balance) in per cent of pre-year GDP (=contribution to change in GDP);

Key figures on the situation of the German economy

2.2
Symbolicon für Wachstumskurve

Rise in gross domestic product (GDP) in per cent
in 2017 compared with the preceding year

4.7
Symbolicon für Lastenwagen

Rise in exports in per cent
in 2017 compared with the preceding year

2.0
Symbolicon für Fabrik

Rise in gross fixed capital formation in per cent
in 2017 compared with the preceding year

1.5
Symbolicon für Arbeiter

More gainfully active persons in per cent
in 2017 compared with the preceding year

Current situation

The economic situation in Germany in March 2018

The German economy’s upswing continued into the beginning of 2018. The global economic environment remains favourable. However, the trade policies of the United States could cause some uncertainty. Despite a clear drop at the beginning of the year, the volume of new manufacturing orders is continuing to trend upwards. Industrial output picked up again in January following a dip at the end of last year. Recent consumer spending has been less dynamic. But the propensity to purchase and retail sentiment remain positive. The high demand for labour in many sectors of the economy is keeping employment figures at record levels. Improved labour market opportunities are creating greater challenges for many employers seeking to recruit. Unemployment and underemployment are continuing to fall.

The German economy made a good start in 2018 following a strong performance in 2017, when it grew by 2.2% (price-adjusted). The current cyclical indicators suggest that the long-running expansion is set to continue. New manufacturing orders are continuing to point upward, and are far higher than they were a year earlier. They are being driven by orders from abroad. Industrial output is also high and developing positively. The indicators of market sentiment suggest that the economy will do well in the coming months, even if the ifo Business Climate Index has recently dropped appreciably. The reason for this is the trade policies of the United States, which have dampened the mood amongst German exporters. The strong euro is also surely playing a part. In the long-term comparison, however, the business climate remains good in view of a positive growth outlook for the global economy and favourable financing conditions in Germany.

Latest press releases

Press releases

  • 31/01/2018 - Press release - Economic Situation and Cyclical Development

    Press release: “A strengthened economy ready to embrace the future”: Federal Government adopts 2018 Annual Economic Report

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  • 12/01/2018 - Press release - Economic Situation and Cyclical Development

    Press release: The Economic Situation in the Federal Republic of Germany in January 2018

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Further information

Graph on the subject of Economic Development; Source: istockphoto.com/jxfzsy