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Article - Economic Situation and Cyclical Development

Economic and Cyclical Development

Introduction

The German economy is continuing to grow, making this year the tenth successive year of expansion. The Federal Government expects price-adjusted gross domestic product to grow by 0.5% in 2019 and by 1.5 per cent in 2020. Both the labour market and wages have continued to develop positively. Together with cuts in taxes and charges, this is resulting in a rise in personal disposable income.

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 a basis for the Working Party on Tax Revenue Forecasting 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. The information provided to 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 the 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. You can find projections from preceding years in the Archive (in German).

You can find the current estimates from the Annual Economic Report here.

Overview of 2019 spring projection

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

GDP by expenditure (adjusted for price) [1]201820192020
Percentage change on preceding year
Gross domestic product1.40.51.5
Private consumption1.01.21.6
Public-sector consumption1.02.01.8
Gross fixed capital formation2.62.22.8
- of which equipment4.22.03.0
- buildings2.42.73.0
Other investment11 April 20161.41.7
Changes in inventories and net acquisition of valuables (contribution to GDP growth) [3]0.611 April 20160.0
Domestic demand1.91.21.8
Exports2.02.03.0
Imports3.33.84.0
External balance of goods and services (contribution to GDP growth) [3]-0.4-0.8-0.2
Price trend:
Private consumption [2]1.61.41.7
Gross domestic product1.92.32.0
Gainfully active persons (in Germany)1.31.10.8
For information purposes only:
Consumer price index1.81.51.8
absolute figures (millions)
Gainfully active persons (domestic)44.845.345.7
Unemployed persons (Federal Employment Agency)2.342.202.11

[1]Up to 2018 provisional figures from the Federal Statistical Office; as of February 2019
[2] Including non-profit-making organisations
[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

1.0
Symbolicon für Wachstumskurve

Rise in gross domestic product (GDP) in per cent
in 2019 compared with the preceding year

2.7
Symbolicon für Lastenwagen

Rise in exports in per cent
in 2019 compared with the preceding year

1.3
Symbolicon für Fabrik

Rise in gross fixed capital formation in per cent
in 2019 compared with the preceding year

0.9
Symbolicon für Arbeiter

More gainfully active persons in per cent
in 2019 compared with the preceding year

Current situation

The economic situation in Germany in July 2019

Industrial activity remains sluggish and there is noticeable headwind coming from foreign demand. Current data are also indicative of a calmer pace in the services sector. This suggests a weak underlying economic trend for the second quarter. Industrial output rose moderately in May, while incoming orders in the manufacturing sector fell considerably. Likewise, the construction industry also recorded a noticeable decline. The rising incomes of private households and fiscal policy stimuli are providing a boost to the economy. The weaker economy is gradually affecting the labour market: growth in jobs is continuing at a slower pace. Unemployment figures stagnated in June.

Following the surprisingly strong growth of the German economy in the first quarter, the current cyclical indicators point to a subdued development in the second quarter.[1] The signals from the service sector suggest that the strong growth at the beginning of the year will slow down somewhat in the second quarter. In addition, industry continues to experience a period of weak growth. While industrial output has recently recovered somewhat at a low level, it has been showing a downward trend since the turn of the year 2017/18. The weak development of new manufacturing orders and the gloomier business climate indicate that the clearly subdued trend in industrial activity is likely to continue. Recently, the construction industry also recorded a sharp decline in output, albeit from a very high level. Even though the labour market is starting to show signs of the economic slowdown, it keeps producing noticeable domestic economic momentum. The number of people in work is continuing to rise, albeit at a slower pace, and income rises are bolstering consumer spending. The government is providing fiscal stimuli, thereby fostering both consumer spending and public spending on consumption and investment. Following restrained growth in the second quarter, the positive forces for growth are likely to prevail again as soon as the global economic environment improves. However, the economy is currently facing considerable downside risks, not least due to trade conflicts, the Brexit process and geopolitical tensions.

For more information about the economic situation in June, please click here.

Latest press releases

Press releases

  • 17/04/2019 - Press release - Economic Situation and Cyclical Development

    Minister Altmaier: Slow period is over, but should serve as a warning: we need to keep improving the business environment.

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  • 30/01/2019 - Press release - Economic Situation and Cyclical Development

    Minister Altmaier: To develop the economy, we need to focus on stimulating growth and on technologies for the future

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  • 11/10/2018 - Press release - Economic Situation and Cyclical Development

    Minister Altmaier: Upswing entering its 10th year – longest period of uninterrupted growth since 1966

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

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

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Further information

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