Upturn Loses Momentum – World Economic Climate Grows Harsher: Joint Economic Forecast Autumn 2018
Externe Monographien,
No. 2,
2018
Abstract
The economic upturn in Germany is entering its sixth year, but is losing momentum. This is due to both demand and supply side factors. On the one hand, Germany’s key sales markets have weakened in line with the slowdown in world trade. On the other hand, a growing number of companies are apparently facing production-side bottlenecks, especially in terms of labour and sourcing intermediate goods. This overlaps with problems in the automotive industry related to the introduction of the new World Harmonised Light Vehicle Test Procedure (WLTP), which has clearly impacted gross domestic product (GDP) growth due to the branch’s economic weight. Adjustment problems, however, should be overcome in the course of the winter half year. Stimuli from fiscal policy measures will also take effect as of the beginning of 2019. After 1.7% growth this year, economic output will increase at rates of 1.9% in 2019 and 1.8% in 2020. Employment will continue to expand clearly, although at a slower pace. The number of registered unemployed persons will approach the 2 million-mark by the end of the forecasting horizon. Inflation will pick up from an average rate of 1.8% this year to 2.0% in 2019 and 1.9% in 2020. Despite its expansionary fiscal stance, the German government will continue to post a budget surplus, although this can be expected to fall from 54 billion euros to around 40 billion euros.
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19.04.2018 • 7/2018
Joint Economic Forecast Spring 2018: Germany’s Economic Experts Raise Forecast Slightly
Berlin, 19 April – Germany’s leading economic experts raised their forecasts for 2018 and 2019 slightly in their Spring Joint Economic Forecast released on Thursday in Berlin. They now expect economic growth of 2.2 percent for this year and 2.0 percent for 2019, versus 2.0 percent and 1.8 percent respectively in their autumn forecast. “The German economy is still booming, but the air is getting thinner as unused capacities are shrinking“, notes Timo Wollmershaeuser, ifo Head of Economic Forecasting. Commenting on the new German government’s economic policy, he adds: “It is precisely when the government’s coffers are full that fiscal policy should reflect the implications of its actions for overall economic stability and the sustainability of public finances. The extension of statutory pension benefits outlined in the coalition agreement runs counter to the idea of sustainability.”
Oliver Holtemöller
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Germany’s Economic Experts Raise Forecast Slightly: Joint Economic Forecast Spring 2018
Externe Monographien,
2018
Abstract
The German economy continues to boom, but the air is getting thinner. Unused economic capacities are gradually shrinking, leading to a slight loss of economic impetus. The pace of economic expansion nevertheless remains brisk: the upturn in the world economy will continue to stimulate exports; and the domestic economy is also expected to remain buoyant thanks to the exceptionally favourable situation in the labour market. The fiscal measures outlined by Germany’s new government in its coalition agreement can be expected to stimulate demand. Annual average economic output can be expected to rise by 2.2 percent this year and by 2.0 percent in 2019. This represents a 0.2 percentage point increase in the institutes’ assessment of growth in gross domestic product versus their autumn 2017 forecast. Employment will continue to see clear growth, but will be weakened by labour market shortages. At the same time, gross wages can be expected to increase markedly. The inflation rate will also rise gradually from 1.7 percent this year to 1.9 percent in 2019.
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14.12.2017 • 39/2017
Cyclical upswing in Germany and in the world
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”, says Oliver Holtemöller, head of the Department Macroeconomics and IWH vice president. “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.
Oliver Holtemöller
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28.09.2017 • 35/2017
Joint Economic Forecast—Autumn 2017: Upturn Remains Robust—Amid Mounting Tensions
The German economic upturn has gained both in terms of strength and breadth. In addition to consumer spending, external trade and investments are now also contributing to economic expansion. These are the conclusions drawn by the economic research institutes in their autumn report for the German federal government. Whereas the very high economic momentum in the first half of the current year will slow slightly, expansion of economic output this year and next will exceed production capacity growth. As a result, overall capacity utilization will increase, with economic output exceeding potential output. Gross Domestic Product is likely to grow by 1.9 percent this year and by 2 percent in 2018 (calendar-adjusted: 2.2 and 2.1 percent, respectively).
Oliver Holtemöller
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Inflation Dynamics During the Financial Crisis in Europe: Cross-sectional Identification of Long-run Inflation Expectations
Geraldine Dany-Knedlik, Oliver Holtemöller
IWH Discussion Papers,
No. 10,
2017
Abstract
We investigate drivers of Euro area inflation dynamics using a panel of regional Phillips curves and identify long-run inflation expectations by exploiting the crosssectional dimension of the data. Our approach simultaneously allows for the inclusion of country-specific inflation and unemployment-gaps, as well as time-varying parameters. Our preferred panel specification outperforms various aggregate, uni- and multivariate unobserved component models in terms of forecast accuracy. We find that declining long-run trend inflation expectations and rising inflation persistence indicate an altered risk of inflation expectations de-anchoring. Lower trend inflation, and persistently negative unemployment-gaps, a slightly increasing Phillips curve slope and the downward pressure of low oil prices mainly explain the low inflation rate during the recent years.
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