Meanwhile, however, the German economy has already turned in growth again for two successive quarters, the second and third. Overall economic output will be much higher at the turn of the year 2009/2010 than on average for 2009. This alone has improved the starting position for 2010. So far, the anxiously anticipated jobs crisis predicted in many quarters has not materialized; indeed the German labor market has proved surprisingly resilient, with the number of people in work falling only moderately. This has kept a lid on the losses in purchasing power stemming from the economic crisis. Bolstered by almost complete price stability, real consumer demand has broadly held its level. In the wake of these developments most economic forecasts for 2010 have been upped significantly in recent months.
Outlook 2010: Economic situation and capital market
We estimate that the German economy will expand in 2010 by 2.8%, meaning that by the end of 2010 it would already have made good two-thirds of the production losses caused by the economic crisis. Although very positive, this still clearly shows that it is taking longer to recover from the financial market upheaval than from earlier recessions.
In the first half of 2010 powerful fiscal stimuli from hefty cuts in taxes and contributions at the beginning of the year and realization of investment in the infrastructure will lead to economic growth of 3% (at an annual rate). But in the second half-year the economy will already start to lose steam, growing by 2% (annualized), partly as the public spending contained in the economic stimulus packages gradually peters out.