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The Economic Situation in Germany in March 2017

2017-03-15 10:45:32

BMWi - Federal Ministry for Economic Affairs and Energy - The Economic Situation in Germany in March 2017

Germanys economy made a good start to 2017. [1] This is particularly true for industry, where the stagnation in production from the final quarter of 2016 ended in January. Industry was supported by pent-up demand and, despite a decline in January, can build on a very satisfying development in the order books. The upswing continues unabated in other economic sectors, particularly in most service sectors. This was demonstrated in March when the Federal Employment Agency undertook a significant upward revision of the data on employment numbers that are subject to social insurance. Relevant economic indicators of market sentiment have brightened considerably and are also indicative of a good start to 2017. In this respect, a further acceleration of economic expansion is likely in the first quarter of 2017, after the German economy had nearly stagnated in summer 2016 and then picked up again between October and December with a gross domestic product growth rate of 0.4% compared to the preceding quarter. [2] In the last quarter of 2016, the most important stimuli for growth once again derived from domestic demand. On the one hand, there were positive contributions to growth through private and public consumption, investments in building and inventory-building, on the other there was a negative contribution from net exports.

The global economy is expected to expand somewhat more strongly this year than it did on average in 2016. Global activity measured by industrial production and world trade had already picked up speed at the end of 2016. Markits Global Purchasing Managers Index maintained its elevated level in February and the global economic climate picked up in the first quarter according to the IFO institute. In the United States, despite the slowdown in growth in the fourth quarter of 2016, economic output is expected to grow more strongly in 2017 than in the previous year. The economic outlook is slightly brighter in the euro area, too. Despite increased risks, economic growth should therefore reach a similar level to the year before. In Japan, economic development has stabilised and economic output is likely to rise moderately this year. In terms of the emerging economies, China is registering more constant growth rates again. As prices for raw materials are rising, Russia and Brazil are expected to overcome their current period of recession. According to its March forecast, the OECD expects the global economy to grow by 3.3% this year, following growth of 3.0% in 2016.

Preliminary figures of the balance-of-payments statistics by the Bundesbank show that in current prices Germany exported ( 3.5%) and imported ( 2.1%) more goods and services in January 2017 than in December 2016. On a nominal basis, exports - and even more so imports - are trending upwards. A major reason for this trend is the quick rise in export and import prices. These increased prices for energy products also mean that energy consumption is rising and that the current accounts balance is falling. The global economic environment and the national indicators on foreign trade point to a further moderate expansion of German exports.

In January, the goods-producing sector expanded by 2.8%. Industrial production in particular was boosted strongly at the beginning of the year ( 3.7%); this is especially true for capital goods producers ( 6.1%). The sales trend confirms the positive picture. Foreign business contributed significantly to the positive development in January. The strong start to the year is partly due to the weak development during the December holiday season, but can also be seen as a further signal for a revival of industrial activity. In spite of a noticeable slowdown in January, new orders expanded in the fourth quarter of 2016 to an extent last seen over six years ago. Indicators of market sentiment and developments on the manufacturing sector employment market are also showing that conditions are favourable. After a solid second half of 2016, the construction industry developed only slowly. Construction output even declined in December (-2.7%) and January (-1.3%). When looking at the number of subzero days and surveys, however, weather-related building delays were not the significant cause for the decline. On top of that, business sentiment in the sector remains good. The conditions therefore point to a continued dynamism in the construction sector.

The positive developments on the labour market are continuing at the beginning of 2017. According to the revised data reported at the beginning of March, overall employment and employment subject to social insurance have risen significantly since last June and more strongly than had been reported. In January, the number of people in work rose further by 59,000 (seasonally adjusted). According to the unadjusted figures, there were 43.6 million gainfully active people in Germany in January, or 1.4% more than a year ago. Development for jobs requiring the payment of social-insurance contributions was even more striking. The figures were 2.4% above the level of the preceding year. The leading indicators continue to suggest a high demand for workers, but it will become more difficult to match the scarce supply and the current demand. Unemployment dropped by 14,000 in February in seasonally adjusted terms. Even according to unadjusted figures, unemployment fell slightly to 2.76 million people.

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