German Economy to Gain Additional Momentum in 2016, IHS Says
January 25 2016 - 1:30AM
Business Wire
Emerging market woes to only partially offset robust domestic
demand
The German economy is forecast to beat government growth
expectations in 2016, according to new analysis from IHS Inc.
(NYSE:IHS), the leading global source of critical information and
insight.
Headline growth in real gross domestic product (GDP) is expected
to be 2.1 percent this year, up from 1.7 percent in 2015, exceeding
the German government’s official forecast of 1.8 percent.
Accelerating growth is expected despite the restraining impact of
weakness or outright recessions in a number of emerging markets
because German domestic demand is likely to be firing on all
cylinders in 2016.
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Exports will be more resilient than generally
expected
“Although the economic slowdown in China and recessions in large
emerging markets such as Russia and Brazil will certainly leave
their mark on global trade in general and German exports in
particular, there are offsetting factors,” said Timo Klein, IHS
Global Insight economist. “Among these factors are healthier U.S.
and U.K. economies and a gradually strengthening Eurozone that is
recovering from the debt crisis that dominated developments during
the first half of the decade. Two-thirds of German exports go to
either other EU countries or the U.S.”
Furthermore, the fairly weak stance of the euro, which is
closely linked to an extremely soft monetary policy from the
European Central Bank (ECB), is expected to enable German exporters
to gain market share in trade with non-Eurozone countries.
Nevertheless, growth in imports is seen to outperform that in
exports, leading to a modest negative contribution of net exports
to GDP growth. Import strength reflects the expected robustness of
domestic demand, which will also boost purchases of goods from
abroad.
Domestic demand is benefiting from an unusually supportive
constellation
Private consumption, which has been fairly weak in Germany for
most of the past 20 years, now benefits from fairly high real
income growth by historical standards. Nominal wage growth of
around 3 percent is accompanied by inflation at around 0.5 percent,
with additional oil price declines since November 2015 ensuring
that purchasing power will continue to gain at a healthy clip in
2016. Labor market conditions are the best in at least 25 years,
employment levels have reached all-time highs and unemployment is
still trending lower at present. Consumer confidence will thus
remain high in the foreseeable future.
At the same time, investment in equipment that has been held
back in recent years due to elevated uncertainty linked to the
Eurozone debt crisis is expected to come more to the fore in 2016,
and construction will pick up for the long-neglected (transport and
IT) infrastructure and for housing – the latter not least due to
the recently accelerating refugee influx.
Finally, public expenditures will increase much more strongly
than during 2010-14, owing to the aforementioned requirements to
boost infrastructure and to meet refugees’ subsistence, and
subsequently job qualification, needs. The government has already
indicated they are willing to use recent budget surpluses for these
purposes and will not tighten fiscal policy elsewhere to
compensate.
Political uncertainties related to managing the refugee
crisis harbors the largest risk
The largest risk to this fairly positive outlook is linked to
the refugee factor. This pertains not so much to the direct impact
on the labor market – unemployment is likely to turn higher from
about mid-2016 onwards as refugees with resident status enter the
jobs market. However, employment should continue their ascent in
any case – but to potentially unsettling political conflicts about
measures to limit immigration.
On balance, IHS Global Insight remains confident that the
government will find solutions that will prevent any severe
disruptions to economic activity, such as violent clashes on the
streets or goods transport being lastingly inhibited by strict
border controls.
About IHS (www.ihs.com)
IHS (NYSE: IHS) is the leading source of insight, analytics and
expertise in critical areas that shape today’s business landscape.
Businesses and governments in more than 140 countries around the
globe rely on the comprehensive content, expert independent
analysis and flexible delivery methods of IHS to make high-impact
decisions and develop strategies with speed and confidence. IHS has
been in business since 1959 and became a publicly traded company on
the New York Stock Exchange in 2005. Headquartered in Englewood,
Colorado, USA, IHS is committed to sustainable, profitable growth
and employs approximately 8,600 people in 32 countries around the
world.
IHS is a registered trademark of IHS Inc. All other company and
product names may be trademarks of their respective owners. © 2016
IHS Inc. All rights reserved.
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