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Germany

Economic engine still purring nicely

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Dr. Lorenz Weimann

Allianz SE
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On the heels of July’s disappointing numbers, the steep rise in industrial production by a seasonally adjusted 3.3% in August shows that the German economy remains on a growth path. Although average industrial output in July/August was only marginally up on the level in the second quarter of this year, the main push to the economy is currently coming from the services sector anyway. In the third quarter real gross domestic product likely rose by 0.3-0.4%.

Allianz SE
Munich, Oct 07, 2016

The 1% increase in new orders in August and the sharp rebound in the ifo-test business climate in September suggest that the stagnation seen in industry for a number of quarters is probably now over. A key factor is likely to have been foreign demand that on average in July/August was no less than 2.5% up on the average second quarter level. Apart from the ongoing moderate upward trend in the eurozone, German exporters are also benefiting from the economic stabilization in a number of important emerging markets. With real household income still rising strongly and boosting domestic demand, economic growth in the second half of 2016 will probably not slow down as much as some had feared. Economic growth of 2% or more in 2016 is by all means within reach.

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Dr. Rolf Schneider

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