Germany: Growth recovery stays moderate – Commerzbank

Commerzbank’s Dr. Ralph Solveen and colleagues say German GDP has surprised on the upside, expanding around 0.35% per quarter over the last three quarters, driven mainly by stronger exports to EU partners. Their Early Bird indicator and improved business sentiment point to continued recovery, but weak private investment and structural issues mean German growth should remain only moderate.

Exports support but investment lags

"The German economic cycle appears to have turned to the upside The main driver of the fairly robust growth over the past three quarters has been stronger foreign demand, while government investment has not yet risen sustainably, despite the special funds. Leading indicators offer hope that this recovery will continue."

"According to the latest GDP figures released last Tuesday, the German economy grew even more strongly in the second quarter than previously assumed. As a result, economic output has risen by an average of 0.35% in each of the last three quarters compared to the previous quarter."

“The odds are also good that the recovery will continue later this year and into next year. This is supported, on the one hand, by businesses’ somewhat more positive expectations as of late. In addition, our own leading indicator, the Early Bird, shows that economic conditions remain above average.”

"Given the upward revision to second-quarter figures and the expectation that the third quarter will be less weak than previously assumed, there are slight upside risks to our growth forecast of 1% this year. However, uncertainty remains regarding how the conflict in the Middle East – and thus energy prices – will continue to develop."

“Furthermore, despite recent developments that have generally exceeded expectations, there is still no sign of a self-sustaining recovery. For that to happen, private investment would need to rise, but it fell again in the second quarter.”

"For this reason, growth in the German economy is unlikely to pick up significantly in the coming quarters but will instead remain moderate."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)