25 Years IWH

Economic Outlook 2018

Cyclical Upswing in Germany and in the World

December 14, 2017

 

At the turn of the year, the cyclical upswing in Germany continues. Gross domestic product is expected to increase by 2.2% in 2017, and because this year has seen significantly fewer working days than before, the rate of change amounts, adjusted for calendar effects, to even 2.5%.

The upswing is broad-based. For quite a long time now, significant increases in employment have been driving private incomes, consumption and housing construction. The latter was, in addition, stimulated by low interest rates. Currently, German exports are benefiting from the vivid international economy. Not least since monetary policy in the euro area remains expansionary for the time being, we expect the upturn to continue in 2018 and production to increase again by 2.2%. Consumer price inflation is, with 1.7%, still moderate in both 2017 and 2018. Although domestic price pressures are on the rise, the effects of the energy price increase in 2017 expire in 2018, and the appreciation of the euro in the summer of 2017 will dampen price dynamics.

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