Joint Diagnosis Germany # 1-2017 – Fostering Upswing Despite Global Economic Risks

The German economy is now in its fifth year of a moderate upswing. Overall economic capacity utilisation is gradually increasing, and production capacities are now likely to have slightly exceeded normal capacity utilisation. At the same time, the economic momentum remains low compared with previous upswings, partly because consumption, which is less susceptible to fluctuations, is the main driving force. In addition, the fact that net immigration increases production potential counteracts greater capacity constraints. Gross domestic product is expected to grow by 1.5 percent in 2017 (calendar-adjusted +1.8 percent) and by 1.8 percent in 2018. The unemployment rate should fall from 6.1 percent in 2016 to 5.7 percent in 2017 and 5.4 percent in 2018. After a rise in consumer prices of only 0.5 percent in 2016, the forecast period is likely to see noticeably higher rates again, with 1.8 percent in 2017 and 1.7 percent in 2018. Public household surpluses are declining somewhat; the financial management of the public sector is slightly stimulating in 2017 and cyclically neutral in 2018.