Germany

RGE's Q1 2010 Germany Outlook

Germany’s economic recovery, which began in Q2 2009, is set to continue in 2010, albeit at a subdued pace. In Q3 2009, the German economy registered positive growth for the second consecutive quarter with GDP growth accelerating to 0.7% q/q on the back of rebounding exports and robust public investment in construction. Compared to Q3 2008, German GDP still declined 4.7% y/y.  As a result of the economic expansion’s unexpected strength, RGE raised its 2009 annual GDP growth forecast for Germany to -4.9% from the -5.1% forecast in October. Despite a visible rebound in the traditional main drivers of German economic growth—exports and investment—the recovery is not yet self-sustained and growth momentum is expected to moderate starting in Q4 2009. In Q3 2009, the largest contribution to growth came from changes in inventories. Going forward, inventory effects will become much more subtle. Moreover, investment activity will only gradually stabilize in light of substantial excess capacity with only public investment registering significant improvements. Private demand is set to falter in 2010 due to fading government programs at home and abroad, rising inflation and the deteriorating labor market. Strong, sustainable demand for German exports is unlikely to manifest itself in 2010 with many of Germany’s major trading partners still exhibiting weak domestic demand.

Read the Q1 2010 Germany Outlook.