The assessment of the business situation in the services sector is exceptionally upbeat and is now back close to the multi-year high seen in April 2011. This suggests that the domestic economy is set to remain buoyant, also helping to create jobs.
Despite the pickup in the business climate at year’s end, the German economy is likely to have been flat in the fourth quarter of this year. The temporary lull in foreign new orders has curtailed industrial production, with output in October down on the third quarter level. The improvement in business expectations at the end of the year boosts the prospect that real gross domestic product will already start to climb again in the first quarter of 2012. We continue to expect the German economy to grow by 1.0% in 2012.