RaboResearch - Economic Research

Dit artikel is ook beschikbaar in het Nederlands

Germany: recovery back on track?

Economic Update

  • Germany’s GDP grew 0.1% q-o-q in 13Q1, primarily driven by private consumption.
  • The cold weather negatively affected the growth figure. Therefore, the recovery may gather momentum in Q2, especially on the back of stronger construction activity.    
  • Producer confidence increased slightly, but is still not pointing towards a firm recovery.
  • Consumer confidence remains high, thanks to the robust labour market and the resulting growth in real incomes. Together with a high willingness to buy, private consumption is likely to remain strong going forward.
  • Due to increasing domestic demand, imports are likely to grow faster than exports in Q2. 

year-on-year change (%)

Source: Reuters EcoWin, Rabobank

Growth disappointed in the first quarter…

Germany’s GDP increased 0.1% q-o-q in the first quarter of 2013. Remarkably, private consumption was the main contributor to the headline growth figure. This partially reflects the timing of the Easter holidays, which were earlier this year and so household spending was concentrated in the first quarter. Fixed investment remained a drag on the economy, but the figure is negatively affected by the reduced construction activity due to the unseasonably cold winter. Inventory formation provided a small negative contribution to GDP, after being the sole growth driver in 12Q4. Net trade contributed positively, but both exports (-1.8%) and imports (-2.1%) decreased significantly.

Contributions to demand components of GDP growth (% point)

Source: Reuters EcoWin

… but may pick up in Q2 due to weather effects

The hard data in April provided mixed sig-nals. On the one hand, industrial production recovered (+1.2% m-o-m compared to an average growth of 0.5% in Q1). Manufacturing orders decreased by 2.3% m-o-m, but orders are known to be volatile. The 3m/3m growth, however, is positive and picking up. Meanwhile, orders in the construction sector were up 2.1% in April, suggesting that activity is picking up after the long and cold winter. However, construction probably faced a renewed setback in June as a result of the floods in South and East Germany. Looking beyond the near-term, conditions for the industry remain positive amid rising house prices and low interest rates.

Manufacturing orders and industrial production

Source: Reuters EcoWin

Consumers are far more optimistic than producers…

Producer confidence indicators increased slightly in June. The composite PMI rose to 50.9. The EC economic sentiment indicator (ESI) increased to 99.8. Since the average levels of these indicators over Q2 as a whole are at the same level as Q1, they do not paint an overly positive picture of the recovery. That said, consumer sentiment is becoming very upbeat. The GfK consumer confidence indicator rose again in July to 6.8. This is the highest value in almost 6 years. Also the recent retail sales data (+0.8% m-o-m in May) point toward solid private consumption growth in Q2. A note of caution is that retail sales figures are notoriously volatile and, therefore, do not always act as a reliable leading indicator.

Producer confidence 

Source: Reuters EcoWin

…thanks to a solid labour market and low inflation

The labour market remains healthy. The unemployment decreased by 12.000 persons in May. After a decrease from 6.9% to 6.8% in April, the unemployment rate stayed constant in May. In Q1, nominal wages increased 2.7% y-o-y (eurozone average was 1.6%) thanks to favourable labour market conditions. Inflation decreased to an average 1.5% in the second quarter from 1.8% in Q1 and is expected to remain stable in the remainder of 2013. The willingness to buy GfK sub-index is high and stable at 36.5 (compared to a low of 20.1 in December 2012). A combination of low interest rates and high confidence result in consumers willing to make large purchases.

Inflation and wages and salaries

Source: Reuters EcoWin

Net trade might turn negative

After two disappointing quarters, the trade data in April were a positive surprise. The upward trend that was already visible in March continued into April. Exports (values) in-creased by 1.7% m-o-m and imports were up by 2.2%. For the current quarter, we expect imports to grow faster (due to higher consum-er spending) than exports. As such, the contri-bution of net trade to GDP growth might turn out to be negative in Q2. Going forward, we expect a slow recovery of exports. The eurozone ESI is still under the neutral cutoff point, but increased markedly by 1.8 points to 91.3. Germany's export sector is, however, still facing headwinds from a weaker Chinese economy and a depreciating Japanese yen.

Exports and imports

Source: Reuters EcoWin


naar boven