Research Germany: Cruising along, but vulnerable
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We think the current boom phase still has ‘air to run' with growth to remain above potential at 2.1% in 2018E and 1.9% in 2019E, before moderating to 1.6% in 2020E.
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We expect domestic demand to rebound, not least due to higher public spending under the new government, while net exports would increasingly become a headwind to growth.
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Risks to the growth outlook for the export-dependent German economy stem mainly from the external side amid the ongoing US-China trade spat and its implication for global trade.
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The tight labour market has started to spill over to higher negotiated wages, leading us to expect a gradual rise in core inflation from H2 18 onwards.
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