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The economic situation in Germany in June 2016

2016-06-10 09:15:57

Germanys economy made a decent start to the second quarter of 2016. Output in the goods-producing sector in April came close to matching the high production level of the first quarter, which had been boosted by special factors. Latest figures show employment continuing to rise strongly, particularly in the service sectors. On the demand side, the expansion of economic activity is primarily driven by private and public spending on consumption. The first quarter saw the seventh successive quarterly rise in private consumer spending. Domestic investment also expanded appreciably in the first quarter. At the same time, investment in construction was bolstered by favourable weather conditions.

The global economy is not growing very dynamically at present. The OECD estimates that growth is likely to amount to 3.0% this year, roughly the same as last year. In the United States, the rate of expansion slowed sharply in the first quarter of 2016. In contrast, economic output in Japan recovered surprisingly strongly in the first quarter. And the development of GDP in the eurozone also accelerated in the same period. In terms of the emerging economies, China is continuing to register high growth, but its economy is continuing to slow. The latest leading indicators for the global economy are currently suggestive of a very gradual recovery.

In the goods-producing sector, Aprils output was up 0.8% over the preceding month. In industry itself, production actually expanded even more strongly ( 1.1%). The manufacture of capital goods developed encouragingly ( 2.2%), whilst the production of intermediate goods stagnated ( 0.0%). Seasonally adjusted output in the construction industry dropped for the second month in succession (April: -1.7%). In contrast, energy generation expanded for the second month in succession (April: 1.1%). Industrial output thus made a decent start to the second quarter. Its production level was slightly above that of the first quarter. In the construction sector, and particularly in the construction industry proper, it was not possible to maintain the production level seen in the first quarter in seasonally adjusted terms. Due to the mild winter, some building activity was brought forward into the first quarter this year. But the business climate in the construction sector remains extremely positive and the order books are very healthy. Once the impact of the weather-related shifts in production has ceased to be felt, the good economic situation in the construction sector will become more visible again. The past several months have seen a tangible improvement in industrial sentiment. There was a clear drop in new orders in April (-2.0%), but their trend continued to point slightly upwards. This suggests that, following the slight period of weakness in the second half of 2015 caused by external economic factors, the industrial sector is likely to continue its moderate acceleration.

Consumer spending continues to be a driving force for the economy. In the first quarter of 2016, private consumer spending rose by 0.4% over the preceding quarter. Recent figures do however show a clear softening of retail turnover (excluding vehicles) following the record figures at the turn of the year; the April figure was actually below the equivalent figure for 2015. Sales in the vehicle trade also dropped in March, but the trend continues to point upwards. The number of new car registrations by private owners in May was well above the 2015 figure. What is already a positive sentiment amongst retailers became even more optimistic in May, and consumer sentiment also improved further. The good situation on the labour market and the quiet development of prices continue to provide a favourable environment for consumer demand.

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