Germany: Economy to grow only by 1.3% in 2016 – Commerzbank

Dr Jörg Krämer, Chief Economist at Commerzbank, notes that in Q1, the German economy expanded at a rate of 0.7% on the final quarter of 2015, much faster than in the preceding quarters.

Key Quotes

“But to a great extent this is due to special factors such as the mild weather. We therefore expect a countermovement for the second quarter.

The as yet unresolved problems in emerging markets also argue against lastingly stronger growth, as they are likely to put a brake on German exports.

Furthermore, profit margins of companies are still under pressure from stronger wage growth, suggesting that momentum of investment in machinery and equipment will remain low.

Private and public consumption thus remain the main drivers of growth. The former is profiting from the favourable labour market situation, while the latter is being boosted by the additional expenditure amid the migrant crisis.

Due to the strong plus in the Q1 we have revised our growth forecasts for this year from 1.3% to 1.5%. For 2017 we expect a growth rate of 1.3%.”