Growth curve with pen symbolizes the economic situation; source:


  • The German economy is experiencing robust expansion. In 2017, gross domestic product rose more strongly than in the previous years.
  • Companies’ order books and the sentiment indicators are providing a positive outlook for the industrial sector. After a weaker outcome in October, industrial production clearly picked up noticeably again in November.
  • Consumer spending remains strong. Private-sector consumption is up and retailers are optimistic.
  • The high demand for labour in many sectors of the economy keeps employment figures at record levels and ensures full employment at regional level. Unemployment and underemployment are continuing their downward trend.

In 2017, gross domestic product rose by 2.2% in price-adjusted terms [1], even though the number of working days was lower than the year before. This was the highest economic growth since 2011. In previous years, consumer spending had been the main driver of economic development. In 2017, the improved global economic environment also resulted in an increase in exports. However, in arithmetical terms, exports contributed only slightly to growth as the increase in domestic demand also led to a rise in imports. At the same time, strong exports boosted investment in equipment. Given high demand and favourable financing conditions, investments in buildings also remained buoyant. Overall, last year therefore saw an economic upswing that was strongly based on domestic and foreign trade. However, the shortage of skilled workers has also become more visible in some segments of the labour market.

At the end of 2017, the strong economic momentum is likely to have weakened somewhat. However, the large volume of new orders and positive business expectations indicate that the economic development will continue to be buoyant this year.

The global economy gained momentum in 2017. According to most recent figures, global industrial output in October 2017 was 3.6% higher than a year ago. The global indicators of sentiment suggest that there is growing confidence in the world economy. The US tax reform is expected to provide additional momentum for the economy. In the longer term, it will show whether the reform will also foster growth and how it will affect international competition to attract business and investment. Overall, the dynamic economic development observed in the industrialised countries continued. GDP in the eurozone grew in the third quarter by 0.6%, by 0.8% in the United States and by 0.6% in Japan. Among the emerging economies, China and India are continuing to see a more constant economic development. Russia and Brazil left their recessions behind. In view of this, the global economy is expected to keep seeing slight growth in the course of 2018.

The improved external economic conditions are supporting German exports. According to balance-of-payments statistics from the Bundesbank, Germany’s exports of goods and services in November 2017 rose strongly, up 2.3% in current prices, compared to the preceding month. The three-month comparison, which is less susceptible to fluctuations, showed a 0.9% growth in exports. Imports rose by 1.2% in November. The three-month comparison shows growth of 1.1%. The cumulative current account surplus in the past year was slightly lower than in the same period of the previous year. The national indicators on foreign trade and investment now suggest that German exports are likely to grow again.

Industrial output is continuing to develop favourably, even though it was somewhat weaker in the second half of 2017 than in the first half of the year. In November, industrial output rose by 4.3%. This strong increase was also a result of lower production figures in October due to public holidays and days taken off to bridge the gap between a public holiday and a weekend. Numbers for new orders in November remained slightly below the record level achieved in the previous month (November: -0.4 %) but continued to trend strongly upward (three-month comparison +4.2%). The brisk ordering activity is also reflected by high order volumes. The positive development of new orders and the excellent business sentiment suggest that industrial output may grow more strongly again. Construction output also expanded again after a weak development in recent months (November: +1.5 %). The trend in exports, however, continues to point sideways. Given the strong economic trend, the construction industry seems to be increasingly operating at near-maximum capacity.

Boosted by rising employment und higher wages, consumer spending has risen strongly in the past year, up by 2.0% in real terms. This growth made an important contribution to the increase in gross domestic product. Following a weaker third quarter, consumer spending is likely to have picked up again at the end of 2017. This is shown by retail sales volumes, which rose by 2.3% in November. However, sales momentum in automotive retail has slowed noticeably since last summer. Overall, sentiment in the retail sector continues to be upbeat. According to the ifo Business Climate Survey, retailers’ expectations in the final quarter were at their highest level since 1991. The positive development in incomes helped to improve consumer sentiment even more.

The positive trend on the labour market continued in 2017. On average, employment in Germany rose by 1.5% to around 44.3 million gainfully active persons in 2017. The unemployment rate decreased by 0.4 percentage points to 5.7%, dropping by 158,000 people to 2.53 million. In November 2017, employment was up by 50,000 (seasonally adjusted). Jobs subject to social security contributions have seen an even more dynamic development. The leading indicators published by the Federal Employment Agency, ifo Institute, and the Institute for Employment Research all suggest that the continuing high demand for labour is set to continue across many sectors of the economy. The number of unemployed persons rose significantly less in December than usual in seasonal terms; it remains below 2.4 million persons. Unemployment and underemployment are continuing to tend downwards in seasonally adjusted terms. As more people with a migrant background are entering the labour market, the slight reduction in unemployment predicted by the employment agencies could slow down somewhat in the future. Despite recent positive developments, other challenges that still need to be addressed are long-term unemployment and the fact that joblessness is more prevalent in regions that are structurally weak.


A detailed report and commentary on the overall situation and trends in the German economy will be published in the February edition of the monthly report, Schlaglichter der Wirtschaftspolitik (“Economic policy highlights”, in German only). This report is expected to be available on the website of the Federal Ministry for Economic Affairs and Energy in the course of the 5th calendar week of 2018.


[1] The report is based on statistical data that were available as of 11 January 2018. Unless stated otherwise, these are rates of change against the respective preceding period on the basis of price-adjusted figures which have also been adjusted in line with the Census X-12-ARIMA procedure for calendar-day and seasonal variations.