Download Focus Germany: Outlook 2017: Solid, despite

Focus Germany
Outlook 2017
December 21, 2016
Solid, despite diminished tailwinds
Authors
Barbara Böttcher
+49 69 910-31787
[email protected]
German GDP growth is expected to slow somewhat in 2017 following
considerable momentum over the last two years. We note the growth rate will
almost half, to 1.1%, in 2017, but around half of this is due to a smaller number
of working days. While the economy will likely have to do without a number of
special factors that provided a boost to domestic demand in 2016, we believe
that the underlying robust domestic economic growth path remains intact. Weak
global trade and political uncertainty will dampen exports and investments.
Eric Heymann
+49 69 910-31730
[email protected]
Jochen Möbert
+49 69 910-31727
[email protected]
Heiko Peters
+49 69 910-21548
[email protected]
Oliver Rakau
+49 69 910-31875
[email protected]
Stefan Schneider
+49 69 910-31790
[email protected]
Editor
Stefan Schneider
Deutsche Bank AG
Deutsche Bank Research
Frankfurt am Main
Germany
E-mail: [email protected]
Fax: +49 69 910-31877
www.dbresearch.com
Content
Page
Outlook 2017: Solid, despite diminishing
tailwinds ..........................................................1
Forecast tables .............................................13
DB German Macro Surprise Index ................14
Export Indicator.............................................15
Event calendar ..............................................16
Data calendar ...............................................16
Financial forecasts ........................................17
Data monitor .................................................18
Original in German: December 16, 2016
Global economic momentum is expected to pick up somewhat in 2017. German
export growth is likely to remain muted, though, due to the weak European
economy, where the outlook is dampened by political uncertainty, lower credit
growth and rising inflation. A pick-up in US growth, also due to the economic
policy measures expected from the new administration, and the end of the
recessions in Russia and Brazil could facilitate an increase in global growth from
around 3 to 3 ½%.
The (geo)political environment is characterised by considerable uncertainty in
2017. Donald Trump’s election promises have increased concerns about the
future of free trade. The rise of populism and upcoming elections in major EU
countries complicate further the EU’s myriad challenges, such as the Brexit
negotiations, the refugee issue and the creation of more robust institutions and
structures. Political uncertainty is expected to weigh on investment plans of
many companies. We anticipate a drop in domestic equipment investment.
The ECB has in all but words indicated that tapering will begin in 2017.
European interest rates are likely to remain at very low levels in 2017, at least at
the short end. Although the Governing Council of the ECB has extended its QE
programme until the end of 2017, the monthly volumes are set to be scaled
back from April onwards. If the ECB’s relatively optimistic assessment of the
economy is confirmed, it could continue tapering the QE programme at the end
of 2017. We anticipate, however, that the ECB’s key rate will remain at 0% for
the foreseeable future, widening the yield gap between Europe and the USA
and resulting in a depreciation of the euro.
The German domestic economy will shift down a gear in 2017, but will likely
remain robust thanks to the healthy labour market. Employment growth is likely
to slow in 2017, also as a result of the pronounced shortage of skilled workers.
In an environment also characterised by normalising inflation – which could
climb from ½ to 1 ½% on the back of rising energy prices – real income growth
is likely to slow slightly. Private consumption, however, will remain the main
driver of growth, expanding by a good 1%. Government spending increased by
around 4% in 2016 driven by the refugee crisis, this rate could be halved as the
influx of refugees slows. The construction industry is expected to report solid
growth of 2%, although this comes as a disappointment given the considerable
order backlog and favourable financing environment. Construction activity is
likely to be hindered by the limited supply of labour and regulatory hurdles.
Outlook 2017
2016: Domestic economy managed to ride out the turbulence
Global trade remains very weak
in 2016
1
Real, % yoy
20
15
10
5
0
-5
-10
-15
-20
-25
00
02
04
06
08
10
GDP in G20
12
14
This performance is thanks to robust domestic economic growth drivers, which
were strengthened by a number of temporary factors. Real consumer
purchasing power, for example, benefitted from the low inflation, fuelling growth
in private consumption of around 2%, as in the previous year. Government
spending increased by as much as 4%, an even greater increase than during
the economic and financial crisis. Spending on refugee care and
accommodation is likely to have played a key role in this trend. The strong
construction industry also made its contribution to the domestic economy.
16
Global trade
Sources: PIG, CPB, Deutsche Bank Research
Uncertainty dampens investment
2
Change yoy, index points, 4Q avg., 3Q lead
(left); % yoy, real (right)
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-80
-60
-40
-20
0
20
40
60
80
100
120
93
97
01
05
09
13
Consumption drove growth
3
Contribution to yoy real GDP growth, pp
5
4
3
2
1
0
-1
-2
-3
12
13
14
15
16
Private cons.
Govern. cons.
Equipment inv.
Construction
Inventories
Net exports
Real GDP
Sources: Federal Statistical Office, Deutsche Bank
Research
2
| December 21, 2016
At just under 2%, headline GDP growth was consistent with our forecast from a
year ago, although the divergence of the domestic economy and foreign trade
was much more pronounced than expected.
2017: Fewer tailwinds for the economy
Sources: Federal Statistical Office, Haver
11
On the other hand, foreign trade put a considerable damper on the economy,
with export growth falling to around 2% from more than 5% last year. While the
slowdown can be traced back to a broad range of factors, the decline in demand
from the US had the greatest impact. This meant that the corporate sector
barely stepped up its investment activity, with some quarters of the year even
revealing a considerable drop in machinery and equipment investments – a
burden that will be carried into 2017 – probably also due to the considerable
political uncertainty.
17
Equipment investment (left)
Policy uncertainty (right, inv.)
10
Following two years in which growth was already strong (1.6% and 1.7%), the
German economy was once again able to pick up speed in 2016 with the
economy likely growing by almost 2%. This means that the economy was able
to ride out a large number of uncertainty factors that arose during the year.
Neither Brexit, nor the tough US election campaign and its surprising outcome
nor the sustained political uncertainty in the euro zone have left a material
imprint on German domestic demand. The economy was even able to handle
the ongoing slump in global trade growth, which more than halved again in 2016
in real terms.
17
The German economy is expected to shift down a gear in 2017, and we forecast
a growth rate of 1.1%. Although this means that the rate will be almost halved,
around half of this effect is due to a working day effect. After adjustments for this
effect, growth only slows from 1.8% to 1.4%. This would still, however, put the
rate of growth above the medium-term potential rate based on Germany’s
demographic outlook and productivity trends.
The slowdown is based on our expectation that the strong tailwind that has
benefitted private consumption and government spending alike will taper off due to
rising inflation and the marked decrease in the number of refugees entering the
country. As energy prices rise due to oil prices, inflation is expected to climb from
0.5% to 1.6%. We have also assumed that the influx of refugees will remain on a
par with the level seen in the autumn of 2016 (16,000 per month), i.e. much lower
than the level seen back in the autumn of 2015 (180,000 per month). With growth of
at least one percent, private consumption is, however, likely to remain the main
pillar propping up the economy thanks to the sustained robust situation on the
labour market combined with the increase in the minimum wage. Government
spending and gross fixed capital formation in construction are also likely to outstrip
the average growth seen over the past five years, increasing by at least 2% and
providing a boost to the domestic economy in the process. The increase in
construction investment that we have forecast nevertheless comes as a
disappointment in light of the considerable excess demand in the residential
Focus Germany
Outlook 2017
construction segment and the government’s infrastructure plans. Capacity
bottlenecks due to the shortage of skilled workers and state/regulatory hurdles are,
however, likely to stand in the way of greater supply growth.
The outlook for Germany’s export economy paints a mixed picture on the whole.
While the global economy is expected to show stronger growth in 2017, the
European economy is likely to lose momentum. Since this region accounts for a
very large proportion of German exports, this means that any acceleration in
demand will only be marginal. All in all, we expect Germany’s export growth to be
similarly subdued to that seen in 2016. Together with the ongoing uncertainty, this
will create an unfavourable investment environment and is likely to put a damper on
industrial production. We expect to machinery and equipment investment to decline
in 2017, despite above-average capacity utilisation, and a moderate increase in
industrial production of just under 1%. However, this is unlikely to put meaningful
pressure on the government budget. Thanks to the robust domestic economy,
Germany should once again be able to generate a slight budget surplus.
International environment: Good and bad news
Foreign demand for German products
not to pick up until 2018
4
% yoy, weights for calculating global GDP growth
in brackets
7
6
5
4
3
2
1
0
-1
-2
-3
-4
01
03
05
07
09
11
13
15
17
The global economy is likely to pick up speed in 2017. Following growth of
around 3% in 2016, it could expand by approximately 3.5% in 2017 – the
highest rate seen since 2011. This development will be driven mainly by a
stronger US economy and by Russia and Brazil, which we expect to be able to
leave their recession behind, even though their growth rates are expected to
remain moderate on the whole. Like many other emerging markets and
developing countries that are also commodity exporters, Russia and Brazil stand
to benefit from rising oil and other commodity prices, following considerable
pressure on these prices over the last two years. The global upturn is, however,
also expected to gain ground outside of these countries. Around two-thirds of
the countries included in our analysis are expected to up their growth rate year
on year in 2017. In 2016, less than half of these countries achieved this.
Global GDP (nominal GDP)
Global GDP (share in German exports)
USA: What can we expect from Trumponomics?
Global GDP (PPP)
Sources: Eurostat, Deutsche Bank Research
The outlook for the US is positive overall. Although the US economy is tipped to
report the lowest growth seen since the recession of 2009 in 2016, with growth
of around 1.5%, the two main factors standing in the way of investments in 2015
and 2016 – the correction of the high inventory levels and the low price of oil –
are likely to be much less of an issue in 2017. In addition, consumption is
expected to increase considerably thanks to rising wages, and the plans
announced by the new US government should provide stimulus in the second
half of the year in particular. This means that US GDP growth could increase to
around 2.3% in 2017 and as much as 3.5% in 2018.
From an economic perspective, dramatic cuts in corporate and income tax,
coupled with higher infrastructure investments and increased spending on the
US military, are likely to be the central pillars. However, the scope, timing and
impact of these measures are extremely uncertain due to the lack of detailed
information available. For the purposes of our forecast, we have assumed that
the extensive tax cuts announced for the corporate sector and households will
be agreed around the middle of the year, and that US President Trump will
1
manage to push a large part of his plans through Congress. This will be no
mean feat, as many Republican representatives are “fiscal hawks” who take a
negative stance on larger budget deficits. In particular, however, a reduction in
corporate taxes, which are high by international standards, could have a real
1
3
| December 21, 2016
Hooper, P., Luzzetti, M., Slok, T. (2016). Using the Fed's model to evaluate Mr. Trump's fiscal
proposals. Global Economic Perspectives. 6 December 2016. Deutsche Bank Research.
Focus Germany
Outlook 2017
Trump's fiscal plans could significantly
increase GDP growth
5
% yoy, Fed's baseline expectation and different
fiscal scenarios calculated with FRBUS
3.5
The positive growth outlook is likely to allow the US Federal Reserve to plough
ahead with its gradual normalisation of interest rate policy. The hesitant interest
rate hikes implemented at the end of 2015 and 2016 could be followed by at
least two further rate hikes in the course of the year, bringing the federal funds
rate up to over 1% by the end of 2017. This is likely to provide new impetus to
the US dollar, because other central banks are expected to maintain their
extremely low interest rates due to less favourable economic conditions, which
will make the prospect of shifting capital to the US an attractive one. This could
result in the US dollar achieving parity with the euro in the first half of the year,
even appreciating to 0.95 by year-end.
3.0
2.5
2.0
1.5
1.0
0.5
0.0
15
16
17
18
Baseline
No personal tax cut
Corporate tax cut to 25%
Full fiscal stimulus
Euro zone: impetus on the wane
Sources: FRB, Deutsche Bank Research
Weaker credit growth =
risk for euro-area domestic demand
6
6
4
0
-2
-4
-6
-8
-10
05
07
09
11
13
Europe is the only region in which growth in 2017 is likely to be much lower than
in 2016. We expect the euro area to report growth to the tune of 1.3%,
compared with around 1.7% (2016) and just under 2% (2015) in the last two
years. The UK economy is also expected to slow, which is likely to have a
markedly negative impact on the German corporate sector due to the
considerable depreciation of the British pound.
We believe that there are four main reasons behind the slowdown in growth in
the euro area. First, after the slump in oil prices provided a boost to real
incomes in 2015 and 2016, inflation will now start to act as a source of
headwind as it gradually returns to normal. At the same time, the recovery on
the labour market has not yet reached the stage at which it could be offset by a
more pronounced increase in wages. Another source of headwind comes from
the flagging growth in lending to the real economy. This recently stabilised at a
low level, which points to a reduced impetus to the domestic economy. We also
expect fiscal policy to provide less impetus. The final factor is the considerable
political uncertainty, which, as in Germany, is expected to make businesses
more reluctant to invest.
2
03
impact very quickly by providing greater incentives for investment that would
also benefit German exporters. On the other hand, the spending plans for
infrastructure and the military are unlikely to play a significant role before 2018
due to the longer planning periods involved and a transmission lag of around
two quarters from higher US to higher European growth.
15
Credit impulse (% GDP)
Private domestic demand (% yoy)
Sources: Deutsche Bank Research, ECB, Eurostat
Uncertainty is the name of the game
Marked uncertainty
7
Economic policy uncertainty, news-based,
6 months moving average
800
700
600
500
400
300
200
100
0
98
00 02
04 06 08
10 12
China
Germany
Italy
Russia
UK
USA
Sources: Deutsche Bank Research, Haver
4
14
| December 21, 2016
16
The outlook for 2017 is characterised to a considerable extent by (political)
uncertainty. As a result of Brexit, the US elections and the upcoming elections in
the Netherlands, France and Germany in 2017, as well as the fact that an
election is now also likely to be called in Italy, it has reached an all-time high, at
least looking at the news-based indicators. Financial market-based uncertainty
indicators show a less dramatic situation, presumably also due to the sedatives
prescribed by the central banks. There is a clear link between considerable
(political) uncertainty and weak investment growth. Companies are not only
likely to find it more difficult to finance larger-scale investments in uncertain
times; the option of postponing investment decisions can also hold an appeal
because it allows companies to be more certain about their future sales
opportunities.
From the perspective of German exporters, we believe that the uncertain future
of trade relations between the UK and the EU, as well as the mounting global
scepticism towards free trade among policymakers and voters alike, are the two
main medium-term risks at present. If Donald Trump were to implement all of his
protectionist election promises once in office, this would be a bitter setback for
Focus Germany
Outlook 2017
free trade and would likely create significant headwind for global trade. The
sluggish, and in some cases failed, negotiations on new major free trade
agreements and the rising number of trade barriers have already been holding
back global trade growth in recent years.
Popularity of political parties
in Germany*
8
Early December 2016, %
CDU/CSU
One major risk that could materialise in the near future is the effect that rising
interest rates in the US will have on international capital flows. Rising interest
rates and a stronger US dollar could end up mutually reinforcing each other,
fuelling a shift in capital to the USA. Emerging markets and developing
countries, in particular, could end up being hit hard, just as in 2013, if the
refinancing/repayment of their debt denominated in US dollars becomes more
expensive, which could deal a blow to their demand for German investment
goods. Furthermore, there are risks hanging over the Chinese real estate
market, which has recently been characterised by substantial price increases.
We expect GDP growth in China to remain virtually unchanged at 6.7% in 2017
thanks to monetary and fiscal policy support; if shockwaves are sent through the
real estate market, however, this would have a considerable impact on the
global economy given the size of the Chinese economy.
SPD
Greens
Germany & Europe: Decisions that will shape the next decade
Left
AfD
FDP
Others
0
10
20
30
40
* Average of major surveys (Allensbach, Infratest Dimap,
Forsa, Forschungsgruppe Wahlen, TNS Emnid)
Source: Wahlrecht.de
Attitude towards globalisation
in Europe
9
2017 will be a year of elections. In Germany, the main political event will be the
German parliamentary elections in September. Pundits are particularly
interested in whether Angela Merkel will manage to be elected Chancellor for
the fourth consecutive time, with current surveys (see figure to the left)
suggesting that she will. Merkel’s CDU/CSU party alliance has a clear lead over
the SPD – almost 14 percentage points ahead in mid-December. This lead
could, however, narrow if the SPD opts to appoint the more popular current
President of the European Parliament, Martin Schulz, as their candidate instead
of party leader Gabriel. Olaf Scholz, First Mayor of Hamburg, on the other hand,
is less likely to stand.
Angela Merkel likely to continue as German Chancellor
"Globalisation is a .. "; % of respondents
45
55
Opportunity
Sources: Bertelsmann Foundation
Threat
Even if Angela Merkel remains Chancellor, it is not clear which party she will
choose as her coalition partner. The Chancellor has said that she does not have
any favourites among the current parliamentary parties. The next German
Bundestag is likely to see seven parties represented: the conservative CDU and
CSU, the social democrats (SPD), the Left Party, the Greens, the right-wing
populist Alternative for Germany (AfD) and the Liberals (FDP). As things stand
at the moment, this sort of parliamentary diversity would only give the CDU/CSU
the option of entering into another grand coalition, or forming a three-party
alliance with the Greens and the FDP. The latter is unprecedented and would
likely require considerable coordination efforts among the partners.
Obviously, a lot can change in terms of the dynamics surrounding the main
political issues between now and the day on which Germany goes to the polls.
The main issues of concern to German citizens are the refugees, domestic
security, pensions and social injustice. The CDU plans to respond by taking a
more conservative stance. For example, the party is in favour of a ban on the
burka and more systematic deportations to improve internal and external
security.
Conservative stance taken by the CDU could make a coalition more difficult
This stance is likely to make it more difficult for the CDU/CSU to find coalition
partners. Both the SPD and, in particular, the Green Party reject the idea of any
5
| December 21, 2016
Focus Germany
Outlook 2017
Political attitude to stance
on globalisation in EU I
10
Of those respondents that see globalisation
as a threat, %
further restrictions as far as refugee policy is concerned. The CDU’s tax policy
plans, which, in principle, rule out any tax increases for the next legislative
period, are also scarcely in line with the concepts put forward by the SPD or the
Greens. Based on the information released to date, both parties are calling for
higher tax on high incomes, inheritance and wealth. Naturally, this was also the
case back in 2013 and ultimately did not stand in the way of a coalition with the
SPD.
The established parties are also conducting the election campaign with an eye
on the AfD. If the AfD were to make greater gains, bringing its share of the vote
to markedly above the 10% mark, particularly by taking the votes of CDU/CSU
voters away, another grand coalition would be more likely. However, the AfD
appears to have reached its peak, which is likely due to the fact that the number
of newly registered refugees has been stable, at around 16,400 a month on
average, since April 2016. In case of a renewed surge in the number of
refugees, an ongoing threat to the internal security or critical developments in
the EU or the euro area the AfD could soon (re)gain (even) more support.
vote for EU exit
want more EU
integration
trust politicians
are satisfied with
democracy
think country has too
many foreigners
0
20
40
60
80
100
Sources: Bertelsmann Foundation
At European level, the 2017 agenda will likely be dominated by elections in two
– or perhaps even three – other key partner countries, and by the management
of a number of difficult issues, in particular Brexit, collaboration between the EU27 and in the euro area, and the refugee crisis. Elections will be held in the
Netherlands in March, in France in April/May and possibly also in Italy in the
course of the year. There are substantial concerns regarding the influence of
eurosceptic, populist parties in these countries. Donald Trump’s electoral victory
in the USA could further embolden nationalism in Europe, spurring on the trend
towards fragmentation and making consistent problem management within the
EU more difficult.
Political attitude to stance
on globalisation in EU II
11
Of those respondents that see globalisation
as an opportunity, %
want more EU
integration
trust politicians
are satisfied with
democracy
think country has too
many foreigners
Sources: Bertelsmann Foundation
50
Brexit – a Herculean task
Preparations for the Brexit negotiations are already underway. Hopes that the
timetable for Brexit could be clarified early on have, however, been shattered,
because the British High Court is still to decide whether the UK government can
trigger Article 50 of the EU Treaty without parliament first issuing its consent, or
even passing a corresponding act. Nevertheless, we believe that the triggering
of Article 50 by the end of the first quarter of 2017 is the most likely scenario.
This means that the European Council will have to make a decision on the
European Commission’s negotiation mandate in the midst of the mentioned
national elections.
vote for remain in EU
0
EU: Challenging agenda irrespective of national elections
100
At the moment, the EU-27 remains resolute in its stance that the UK can only
maintain access to the EU internal market if it accepts all four EU freedoms,
makes certain financing contributions and accepts the European Court of
Justice as the dispute resolution institution. Obviously, negotiations are always
dynamic and the final outcome may vary considerably from the original positions
– as long as both sides feel that the final document protects their main interests.
Difficult day-to-day business will keep the EU on its toes
In addition to Brexit, the EU also has other politically sensitive and economically
important issues to tackle, including, first and foremost, migration and the
agreement between the EU and Turkey. Together with the closure of the
Balkans route, the agreement has proved sufficiently effective to date. Turkey
has taken measures to prevent migrants from entering Greece illegally in return
6
| December 21, 2016
Focus Germany
Outlook 2017
Asylum applications and refugees
registered in the EASY system*
12
for financial support from the EU (EUR 3 bn has been granted to date, with
another EUR 3 bn envisaged).
Turkey, however, is likely to be more interested in the EU’s pledge to abolish the
visa requirement for Turkish citizens if the country meets a number of
conditions. Since these conditions have not yet been met, the liberalisation of
the visa rules is still hanging in the balance. Despite harsher rhetoric from both
Turkey and the EU, and in particular from the European Parliament, and despite
ongoing tension, both sides are likely to see the continuation of the agreement
as an advantage.
200000
150000
100000
50000
0
Asylum applications
The second issue, trade, relates to key issues that will likely reveal the extent to
which the EU can mend rifts between the member states and what stance it
wants to take towards external partners. These issues range from the
acceptance of the Commission’s proposals for dealing with imports from China
in connection with future anti-dumping investigations, to the pending free trade
agreements (ratification of CETA) and more general aspects relating to free
trade and the open markets policy with regard to the new US government.
Refugees
* Preliminary registrations that may include double count
Sources: BAMF, BMI
Debate on the mix of monetary and fiscal policy in the EMU area
Refugees in Greece and Italy arriving
via the Mediterranean
13
200000
150000
100000
50000
0
GR
Finally, the relationship with Russia, including the sanctions, is also on the EU’s
agenda. Changes of government in some countries could result in a more
accommodative stance in this respect. The conservative French presidential
candidate, François Fillon, for example, has spoken out in favour of a return to
normal relations with Russia.
IT
Source: UNHCR
ECB balance sheet climbs to
new highs
ECB total assets, EUR bn
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
14
This shows that the outcome of the elections will play a key role in shaping
further developments within the EU. In Germany, the other partner countries that
are set to hold elections, and also in the EU-27 as a whole regarding Brexit, as
well as in the UK, 2017 will see key decisions being made that will shape the
next decade and well beyond.
ECB: QE will remain in place until the end of 2017
07 08 09 10 11 12 13 14 15 16 17
Projected EUR 80 bn asset purchases per month
until March 2017 then EUR 60 bn
Sources: Deutsche Bank Research, ECB
7
The third key issue relates to an appropriate mix of monetary and fiscal policy
measures and further steps towards political coordination within the euro zone.
Recently, the European Commission has, for the first time, issued a
recommendation for a certain positive fiscal course within the euro zone. It
recommended additional impetus corresponding to 0.5% of GDP, which would
come primarily from countries with healthy state finances. The German Federal
Minister of Finance Schäuble, however, has rejected the proposal as
overstepping the Commission’s remit. The Eurogroup also emphasised that
structuring appropriate fiscal policy lay in the individual and joint sphere of
responsibility of the member states, pointing to the differences in national fiscal
leeway and consolidation measures.
| December 21, 2016
At its meeting in December, the European Central Bank (ECB) extended its
bond purchase programme (QE) beyond the previous minimum period, which
would have ended in March 2017. It plans to buy bonds at least up until the end
of 2017 in order to sustain the support for the economy from its expansionary
monetary policy. From April onwards, however, the monthly volume is to be
reduced from EUR 80 billion to EUR 60 billion, with the ECB citing the marked
decline in the risk of deflation as its motivation for this decision. At the press
conference, ECB President Mario Draghi did, however, emphasize that
downside risks continue to dominate the economic outlook and that the
purchase programme could be extended and/or expanded at any time if need
be.
Focus Germany
Outlook 2017
Rising US interest rates
strengthen USD
15
%-pts. difference between US and German 5Y
govenment bond yields (right)
1.25
0.5
1.2
1
1.15
1.5
1.1
2
1.05
2.5
1
0.95
3
15
16
EUR in USD (left)
US-German yield differential (right,
inverted)
Sources: Deutsche Bank Research, Global Insight
Compared with the fairly optimistic forecasts of the Central Bank, we believe
that there are downside risks associated with growth, in particular. Our GDP
growth forecast for the euro area in 2017 is almost half a percentage point lower
than the ECB’s. This is compounded by the fact that inflation is increasing due
to higher energy prices in particular, whereas core inflation shows little sign of
increasing to date. This is not likely to happen until the labour market achieves
higher capacity utilisation. It should, however, be possible to whittle the bond
purchase programme down further at the end of 2017 if none of the many
economic and political risks materialise. This is likely to become the topic of
debate again in the second half of 2017 anyway, because the ECB is expected
to find it increasingly difficult to find sufficient bonds on the financial market that
meet its criteria.
All in all, however, the exit from the current extreme monetary policy is likely to
be a very long and drawn-out process with a number of stops for breath along
the way, as the example set by the US Fed has shown. As a result, the ECB’s
key rate is unlikely to shift away from the current 0% mark in the foreseeable
future. This means that short-term market rates are likely to remain low in the
euro area. By contrast, the yields on bonds with longer maturities could show
more of a reaction to the increase in yields in the USA, even if the ECB’s
ongoing bond purchases are also likely to keep yields on (German) government
bonds at a low level especially in a historical comparison. This should benefit
the US dollar, which will gain ground against the EUR.
The outlook in detail
Private consumption: oil dampens but solid labour market and migration are
supportive
Filling open positions becomes more
difficult
16
Job vacancy duration in days
100
90
80
70
60
50
40
30
20
10
0
00
02
04
06
08
Germany
10
East
12
14
16
West
Sources: Federal Employment Agency, Deutsche Bank
Research
Private consumption growth will probably slow down to 1.2% in 2017 (2016F:
1.9%) but is still likely to constitute the main growth driver. It made up just over
half of average GDP growth of 1.7% between 2014 and 2016. This was due to
the favourable interplay between the oil price drop, high employment growth
related to migration and solid wage increases.
The German labour market continued its positive performance in 2016. The
number of people in employment rose by 1.0% to a record number of around
43.5 million, while the unemployment rate declined to 6.1%, the lowest level
since reunification. The rise in employment continues to be driven primarily by
migrant entry into the German labour market. Migration of workers, especially
from Eastern Europe, is thus a significant factor in German economic growth
and has eased the labour shortages persisting in some areas. Approximately
60% of the 1% rise in employment in 2016 was likely the result of migration.
Around ¼ of the 1.9% GDP growth in 2016 was due to migration according to
2
our crude estimation.
Early indicators signal sustained high demand for labour in the short term and our
overall solid economic forecast can also be expected to buoy high demand for
labour for the medium term as well. The number of job vacancies currently stands at
2
8
| December 21, 2016
We have taken into account the typically lower level of productivity and the lower average number
of working hours of migrants compared to Germans. Federal Statistical Office census data was
used to roughly estimate the number of working hours and productivity of migrants compared to
Germans. The negative difference in wage of the younger cohort was used as a rough
approximation for the decline in productivity, indicating a wage gap of 25%. Foreigners work
around 5% fewer hours due to the different employment structure. See also Bräuninger, D.,
Peters, H. (2014). Temporary immigration boom: A wake-up call for politicians? , Standpunkt
Deutschland. 28 July 2014. Deutsche Bank Research. Bräuninger, D., Peters, H., Schneider, S.
(2015). Influx of refugees: An opportunity for Germany, Standpunkt Deutschland. 3 November
2015. Deutsche Bank Research.
Focus Germany
Outlook 2017
Rise in employment driven by migration
remains at a high level
17
Change yoy ('000 persons)
300
250
200
Real wage growth is set to slow in 2017. We expect to see nominal wages grow
at a moderate rate to about 2 ½%. Around half of the increase in wages
governed by collective bargaining agreements relates to agreements concluded
in 2016, which set out a rise of somewhat more than 2%. The following
bargaining rounds can be expected to have the largest impact on wages
governed by collective bargaining agreements in 2017: public sector (federal
states), retail, wholesale, foreign trade and the metals and electronics sectors.
The 4% increase in the minimum wage from EUR 8.50 to EUR 8.84 per hour
with effect from 1 January 2017 will also support wage growth. The rise in
inflation – particularly driven by the oil price – from 0.5% to 1.6% that we expect
in 2017 overcompensates the strong nominal wage growth, meaning real wage
growth is likely to decelerate from the exceptionally high level of the last two
years.
150
100
50
0
12
13
14
15
almost 1 million (+9% yoy), with the time to fill a vacant position standing at a record
of 97 days. Employment is set to increase further, driven by migration. The number
of persons in employment should increase by around ½% or some 230,000 workers
in 2017. However, we also expect a simultaneous increase in the unemployment
rate to 6.2%, as an increasing number of refugees are permitted to register as
unemployed after completing skills acquisition and language courses.
16
EU-8
EU-2
Croatia
GIPS
Balkans
East European third countries
Non-European Asylum Country of Origin
Sources: Federal Employment Agency, Deutsche Bank
Research
Public finances: Surpluses continue
18
Public debt level
% of GDP
90
80
70
60
50
00
05
10
15
20
Sources: Bundesbank, Deutsche Bank Research
Profit-related taxes 2016
19
% yoy, Q1-Q3 2016 vs. Q1-Q3 2015
40
30
20
10
0
Income tax
Source: Bundesbank
9
| December 21, 2016
Corporate tax
Germany can expect to achieve a positive budget balance of close to EUR 20
billion or 0.5% of GDP (after 0.7% in 2015) also in 2016. The high surplus
continues to be based on healthy tax revenue streams (~4% yoy) thanks to high
domestic momentum. Income tax revenue rose by around 10%; while
corporation tax revenue increased even more, by over 30%. Despite the latest
rise in capital market interest rates, the interest burden is likely to have declined
further as well. We estimate those savings to have amounted to several billion
EUR in 2016. The surplus would have been even higher if social security
benefits had not risen by 2 ½% compared to 2015. The rising trend in social
security expenditure, which has increased by 15% since 2011, thus persists,
despite low rates of unemployment and record employment. The higher costs of
refugee care also increased spending in 2016, with the lion's share of expenses
incurred at state and local levels. For example, federal state expenditure for
municipalities to tackle the refugee crisis rose by close to EUR 3 billion,
according to the Deutsche Bundesbank, with the federal states receiving a
similar amount of federal budget funds.
Despite the somewhat subdued growth momentum in 2017 (rise in numbers of
employed and GDP growth 0.5% and 1%; 2016 1% and 1.9%), a similar level of
nominal growth to 2016 can be expected due to rising inflation. Moreover the
reserves in the federal budget from previous years may offset somewhat less
dramatic growth in tax revenues in 2017, meaning we expect a positive budget
balance of 0.5% for 2017 too. Although the costs of tackling the refugee crisis
are set to decline, a rise in social security and personnel expenditure due to a
renewed surge in refugee arrivals remains the greatest fiscal risk in 2017. The
budget balance forecast together with nominal GDP growth of around 2% is
likely to further reduce government debt, which has already fallen from more
than 80% to the current 70% over the last few years. If this trend continues, the
debt ceiling of 60% of GDP stipulated in the Maastricht Treaty will be reached
before the end of the decade. This projection already takes into account the
likely implementation of a tax reform benefitting small and medium-sized
incomes after the German parliamentary election and thus lower surpluses after
2017.
Focus Germany
Outlook 2017
Construction: Trend reversal in commercial construction
Gross fixed capital formation in
construction
20
% yoy
10
5
0
-5
12
13
14
15
16
17
Residential construction
Commercial construction
Sources: Federal Statistical Office, Deutsche Bank
Research
New orders
21
2010=100, swda
200
175
150
125
100
75
05
07
10
13
16
Residential construction
Commercial construction
Public construction
Sources: Federal Statistical Office, Deutsche Bank
Research
Germany: Residential properties
22
% yoy
9
6
3
0
Construction investment recorded a year-on-year increase of almost 3% in
2016, with housing construction increasing by around 4% and still dominating
investment activity. The excess demand – a shortage of up to 1 million homes in
metropolitan areas and major cities – is likely to remain the key issue in the
construction industry well beyond 2017. Lack of land for construction and
capacity restrictions remain the biggest hindrances to construction activity.
Additional momentum can, however, be expected for 2017, given the
considerable increase in new orders (2016: +15%) and planning permissions
granted (2016: +14%). Building codes and environmental regulations could also
be eased, as new housing is urgently needed due to the population increase of
around 1.5 million as a result of high migration levels over the past two years.
We therefore expect housing investment to rise by close to 5%. This could
initially raise the number of homes completed to 300,000. Assuming a need for
at least 350,000 homes, the excess demand would nevertheless increase.
House prices also continued to rise significantly in 2016 buoyed by high excess
demand. They rose, as anticipated, by an average of 5-7%, while apartment
prices saw a 7-8% increase, according to BulwienGesa (126 towns and cities).
As in recent years, price momentum in metropolitan areas and major cities was
the highest, although even many smaller towns saw price increases; no price
declines were reported in any of the 126 towns and cities. Prices now stand at
their historical average and have thus concluded normalisation based on OECD
affordability indicators, price-to-income and price-to-rent ratios. The price boom
is also reflected in rent momentum. Prices for new lets rose by 4 ½%, while
those for relets rose by more than 4 ¾% in 2016. This is the heftiest rise since
1994, despite the introduction of the rent ceiling in 2015.
Prices are expected to rise again in 2017 given the fact that the shortage
continues to grow. This therefore represents the beginning of the overvaluation
phase, which price momentum could dampen a little. Moreover, the latest capital
market interest rate increase of nearly 0.5 percentage points could enable
mortgage rates to climb back towards 2% (currently 1.5%). However, since it will
take many years to reduce the housing shortage, the risk of a real estate bubble
in the current cycle remains high.
Commercial construction is likely to face a trend reversal in 2017. The
proportion of vacancies has declined heavily in many towns and cities. The
number of office employees has grown by around 2% p.a. in recent years
thanks to positive domestic demand developments. Moreover, the dramatic rise
in new orders and planning permissions indicate recovery, which is why we
anticipate growth of over 1% (after almost -6% from 2012 to 2016). In spite of
the fact that the decline in the vacancy rate can be expected to continue, the
investment momentum in commercial construction may also be sustained in
2017. After a 3% growth spike in 2016, public construction investment is likely to
increase again. New orders and planning permissions in this area, particularly
for road construction, increased significantly at the beginning of 2016. However,
new orders have been on the decline again since. Moreover, public construction
has been somewhat sluggish overall in the last five years, which is why we
forecast an increase of just ½% in 2017, on the heels of a strong 2016.
-3
00
04
08
12
Residential real estate prices
Rents, new
Rents, exisiting
Sources: BulwienGesa, Deutsche Bank Research
10 | December 21, 2016
16
Net trade burden on growth in 2017 – recovery not likely until 2nd half 2017
German export performance was ill-fated in 2016. Demand from abroad –
approximated by GDP growth weighted by the relevant export market share –
declined somewhat year on year, and exchange rate movements were
unfavourable for German exporters. The weaker demand from the non-EMU
industrialised countries and emerging markets also served to dampen German
Focus Germany
Outlook 2017
Slowdown in German export growth
23
% yoy, pp,12MMA
12
10
8
6
4
export growth. However, relatively solid demand from the euro area had a
stabilising effect. Exports to the USA, Germany's largest export market with a
share of around 9%, performed poorly (Jan/Sept 2016: -6% yoy). Exports to
Emerging Markets declined dramatically in some cases, as the low price of oil
and/or political challenges put some countries under considerable pressure
(exports to Saudi Arabia Jan/Sept 2016: -26% yoy; Brazil: -17%). Exports to
Italy (+6%), Poland (+5%) and, despite slowing GDP growth, China (+4%) were
the largest contributors to growth.
2
0
-2
-4
12
13
14
15
16
Advanced Economies ex EMU
Emerging Markets
EMU
Total
Sources: Eurostat, Deutsche Bank Research
Mixed outlook for German exports
in the coming months
24
% 3M mov avg yoy (left),
Standardized values (right)
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
10
11
12
13
14
15
16
17
Nominal global trade (left)
German merchandise exports (left)
Sentiment indicators for exports are providing mixed signals at present. While
the Purchasing Managers' Indices paint a very positive picture for the next few
months, ifo export expectations recently fell significantly, but were only slightly
below the long-term average. The global economy, still expected to be weak
overall in the first half of the year, and the numerous sources of political
uncertainty are likely to cause businesses there to postpone investments. This
would affect the foreign EMU markets in particular. An emerging US upturn
could lend the global economy some momentum from the second half of 2017,
meaning that German exports will see relatively weak annual average growth
year on year in 2017 (1.8%), and then climb much higher in 2018 (3.7%). This
assumes that the new US government under President Trump does not
introduce any trade restrictions. The higher oil prices are also likely to calm the
situation in the producing countries. Another factor is that our FX strategists
predict a much weaker EUR compared to the main trading partner currencies.
Imports are likely to increase more than exports given the overall solid
performance of the domestic German economy expected during the forecast
period. As a result, it is probable that net exports will weaken GDP growth for
2016 and 2017 (-0.2 pp each year), with the effect neutral in 2018.
The German current account surplus is set to climb to an all-time high of 8.8% of
GDP in 2016. The substantial increase since 2013 can, however, be almost
completely explained by the oil price-related decline in spending on oil imports.
The tentative recovery of the oil price is therefore likely to mean that the surplus
will fall to 8.2% in 2017. In the medium term, the current account surplus can be
expected to fall to 7% of GDP in 2020 as a result of the unfavourable
demographic developments, the persisting real estate boom and significantly
3
reduced momentum of globalisation.
PMI new exp. orders (lagged 3M, r.)
Declining machinery and equipment investments in 2017
ifo export exp. (lagged 3M, r.)
Sources: Deutsche Bundesbank, ifo, Markit, CPB,
Deutsche Bank Research
Capacity utilisation slightly above
multi-year average
Capacity utilisation in German manufacturing, %
100
90
80
70
60
50
07 08 09 10 11 12 13 14 15 16
25
The environment for investment in machinery and equipment remains very
subdued in light of the restrained outlook for German exports in the short term
and the high level of (political) uncertainty. Although capacity utilisation is
currently around 2 ½% above the long-term average, this is unlikely to be
enough to substantially increase expansion investments, given the risks.
Replacement investments can be expected to continue to be made by the
majority.
The brighter prospects for exports from the second half of 2017 will likely mean
that investments in machinery and equipment gradually gains momentum. Our
forecast for investments in machinery and equipment in 2017 is not as weak as
it may appear at first glance, as the negative statistical carry-over effect from
2016 per se implies a decline of 1.6%. A slight increase in investments in
machinery and equipment is predicted in the course of 2017 (Q4 vs. Q1:
+0.7%). We expect investments in machinery and equipment to expand by
almost 2 ½% in 2018.
Capacity utilisation, sa
Average since 1992
Source: ifo
11 | December 21, 2016
3
Peters, H., Winkler, R. (2016). Germany's massive CA surplus set to decline. Current Issues. 26
August 2016. Deutsche Bank Research.
Focus Germany
Outlook 2017
Slight production growth for German industry in 2017
Strong growth in orders based on
current data
26
Manufacturing in Germany, 2010=100, sa
117
115
113
111
109
107
105
14
15
Production
Source: Federal Statistical Office
16
Orders
Production in Germany's manufacturing sector is likely to have increased by
around 1% in 2016 in real terms. This therefore more or less maintained the
result from 2015 (+1.1%). The period of relatively low cyclical fluctuations in
German industry experienced since 2012 also continued in 2016. There were no
major spikes in the production results of the large industrial sectors either in
2016. Domestic production rose by slightly above the average, including in the
automotive, pharmaceutical and plastics sectors. In contrast, the chemicals
sector, metal production and mechanical engineering fared slightly less well
than the manufacturing sector as a whole.
Germany's manufacturing sector is likely to only slightly boost production in
2017 as well. We expect real growth of 0.5%, as the persistent weakness in
global trade outlined in this report indicates. In addition, there is low momentum
in gross fixed capital formation in machinery and equipment, both in Germany
and in key export markets. In such an environment, the stimulus in demand in
the export-intensive German industrial sectors with a focus on capital goods is
unlikely to be strong enough to generate a marked increase in production. This
is true, for instance, for the mechanical engineering and large parts of the
electrical engineering sectors. Demand for cars in key automobile markets is
unlikely to grow as strongly in 2017 as in 2016 (China), or is likely to stagnate at
a high level (USA) or decline significantly (UK). Continental Europe's demand
for cars, however, is likely to continue to recover.
Moreover, we do not believe German industry to be at an excessively high risk
of recession. For one thing, business, production and export expectations in the
manufacturing sector were in positive territory at the end of 2016. For another,
capacity utilisation in the third and fourth quarters of 2016 increased twice in a
row. Current figures indicate that there has been quite positive trending in new
orders as well.
Key commodity prices are likely to be higher in 2017 than in 2016.
Consequently, national economies with “business models” strongly based on
commodity exports will fare better economically than in 2015 and 2016. Such
countries' demand for German products could thus increase again somewhat,
however in most cases only slightly.
As we anticipate rather weak global trade for 2018 as well, and investment
activity in many places still remains feeble, German industrial production can
again expect to see a gain of around 1% at best. We expect employment to
move more or less sideways, albeit at a high level, for the next several months.
Barbara Böttcher (+49 69 910-31787, [email protected])
Eric Heymann (+49 69 910-31730, [email protected])
Jochen Möbert (+49 69 910-31727, [email protected])
Heiko Peters (+49 69 910-21548, [email protected])
Oliver Rakau (+49 69 910-31875, [email protected])
12 | December 21, 2016
Focus Germany
Outlook 2017
Economic forecasts
DX
Real GDP
(% growth)
2016F 2017F 2018F
Consumer Prices*
(% growth)
2016F 2017F 2018F
Current Account
(% of GDP)
2016F 2017F 2018F
Fiscal Balance
(% of GDP)
2016F 2017F 2018F
Euroland
Germany
France
Italy
Spain
Netherlands
Belgium
Austria
Finland
Greece
Portugal
Ireland
1.7
1.9
1.2
0.9
3.3
2.1
1.2
1.3
1.5
0.3
1.2
3.3
1.3
1.1
1.3
0.7
2.5
2.1
1.1
1.5
1.2
1.4
1.2
2.8
1.5
1.5
1.1
0.7
2.2
1.5
1.3
1.6
1.5
1.6
1.1
3.0
0.2
0.5
0.3
-0.1
-0.4
0.1
1.8
1.0
0.4
0.2
0.7
-0.1
1.4
1.6
1.2
1.0
1.7
1.0
2.0
1.8
1.3
1.3
1.4
1.1
1.5
1.6
1.3
1.2
1.7
1.2
1.8
1.6
1.4
1.0
1.5
1.4
2.9
8.8
-0.5
2.9
1.9
10.5
1.0
2.6
-0.6
1.0
0.5
12.0
2.8
8.2
-0.3
2.7
1.7
10.2
1.0
2.8
-0.4
1.2
0.7
10.0
2.5
7.8
-0.1
2.3
1.7
10.2
1.0
3.1
-0.3
1.5
0.7
8.0
-1.8
0.5
-3.2
-2.3
-4.4
-1.1
-3.0
-1.4
-2.3
-3.7
-2.8
-1.1
-1.5
0.5
-3.2
-2.3
-3.2
-0.7
-2.5
-1.2
-2.2
-2.4
-2.5
-1.1
-1.5
0.2
-3.1
-2.3
-2.8
-0.5
-2.6
-1.0
-1.7
-2.2
-2.5
-1.0
UK
Denmark
Norway
Sweden
Switzerland
2.1
1.0
0.7
3.2
1.4
1.2
1.7
1.6
2.0
1.5
1.1
1.8
1.8
2.3
1.7
0.6
0.2
3.6
1.0
-0.3
2.3
1.1
2.7
1.7
0.5
2.7
1.4
2.5
1.9
0.7
-5.2
6.5
4.4
4.6
9.5
-4.8
6.5
6.2
4.2
9.3
-4.0
6.5
7.0
4.4
9.0
-3.3
-2.1
3.7
0.1
-0.1
-2.9
-2.5
3.9
-0.2
-0.1
-2.5
-1.9
4.2
0.0
-0.1
Czech Republic
Hungary
Poland
2.3
2.2
2.8
2.6
2.6
3.2
2.7
2.7
3.4
0.6
0.4
-0.6
1.6
2.0
1.4
2.2
2.8
1.7
2.1
5.6
-0.5
1.1
4.6
-1.2
0.7
4.2
-1.5
-0.4
-1.8
-2.6
-0.8
-2.6
-3.0
-0.7
-2.2
-2.9
United States
Japan
China
World
1.5
0.7
6.7
3.0
2.3
1.0
6.5
3.4
3.5
1.2
6.0
3.8
1.2
-0.3
2.0
4.3
1.9
0.5
2.5
5.3
2.2
1.1
2.6
4.5
-2.8
3.9
2.4
-3.4
3.9
2.1
-2.8
3.7
1.8
-3.2
-3.7
-4.0
-3.1
-3.6
-4.0
-2.5
-3.2
-4.0
*Consumer price data for European countries based on harmonized price indices except for Germany. This can lead to discrepancies compared to other DB publications.
Sources: National Authorities, Deutsche Bank
Forecasts: German GDP growth by components, % qoq, annual data % yoy
DX
2016
2014
2015 2016F 2017F 2018F
2017
Q1
Q2
Q3
Q4F
Q1F
Real GDP
Private consumption
Gov't expenditure
Fixed investment
Investment in M&E
Construction
Inventories, pp
Exports
Imports
Net exports, pp
1.6
0.9
1.2
3.4
5.5
1.9
-0.3
4.1
4.0
0.4
1.7
2.0
2.8
1.7
3.7
0.3
-0.5
5.2
5.5
0.3
1.9
1.9
4.4
2.2
0.7
2.7
-0.3
2.2
3.0
-0.2
1.1
1.2
2.2
0.9
-1.5
2.2
-0.1
1.8
2.5
-0.2
1.5
1.4
1.0
2.4
2.4
2.8
0.0
3.7
4.2
0.0
0.7
0.6
1.1
1.6
1.1
2.3
-0.2
1.4
1.5
0.0
0.4
0.2
1.2
-1.6
-2.3
-1.9
-0.2
1.2
0.1
0.6
0.2
0.4
1.0
0.0
-0.6
0.3
0.0
-0.4
0.2
-0.3
0.5
0.4
1.1
0.5
-1.0
1.8
0.0
0.4
0.6
-0.1
0.4
0.3
0.3
0.7
0.5
1.1
0.0
0.6
0.7
0.0
Q2F
0.3
0.3
0.3
0.4
0.2
0.5
0.0
0.8
0.9
0.0
Consumer prices*
Unemployment rate, %
Industrial production
Budget balance, % GDP
Public debt, % GDP
Balance on current account, % GDP
Balance on current account, EUR bn
0.9
6.7
1.5
0.3
74.9
7.3
213
0.2
6.4
0.5
0.7
71.2
8.5
256
0.5
6.1
1.3
0.5
68.2
8.8
275
1.6
6.2
0.8
0.5
65.9
8.2
265
1.6
6.6
1.2
0.2
63.5
7.8
259
0.3
6.2
0.1
6.1
0.5
6.1
1.1
6.0
2.5
6.1
1.4
6.2
Q3F
0.4
0.4
0.3
0.4
0.3
0.5
0.0
1.1
1.3
0.0
Q4F
0.4
0.3
0.3
0.6
0.2
0.9
0.0
1.0
1.1
0.0
1.3
6.3
1.1
6.4
*Inflation data for Germany based on national definition. This can lead to discrepancies to other DB publications.
Sources: Federal Statistical Office, German Bundesbank, Federal Employment Agency, Deutsche Bank Research
13 | December 21, 2016
Focus Germany
Outlook 2017
DB German Macro Surprise Index
DB German Macro Surprise Index
Average of last 20 z-scores of data surprises
0.5
0.4
0.3
0.2
0.1
0.0
-0.1
-0.2
-0.3
-0.4
-0.5
14
15
DB German Macro Surprise Index
16
+/- 1 standard deviation
Values above (below) 0 indicate the data came in better (worse) than expected
Sources: Bloomberg Finance LP, Deutsche Bank Research
Last 20 published economic data for Germany
DX
Bloomberg Tickers
Indicator
GRCAEU Index
GRIPIMOM Index
GRCP20YY Index
GRZEWI Index
GRZECURR Index
GRIFPBUS Index
GRGDPPGQ Index
GRIMP95Y Index
GRFRIAMM Index
GRUECHNG Index
MPMIDEMA Index
MPMIDESA Index
GRIORTMM Index
GRIPIMOM Index
GRCAEU Index
GRZECURR Index
GRCP20YY Index
GRZEWI Index
MPMIDESA Index
MPMIDEMA Index
Current Account Balance (EUR bn)
Industrial production (% mom)
CPI (% yoy)
ZEW Survey Expectations
ZEW Survey Current Situation
IFO Business Climate
GDP (% qoq)
Import Price Index (% yoy)
Retail Sales (% mom)
Unemployment Change (000's mom)
Markit Manufacturing PMI
Markit Services PMI
Factory Orders (% mom)
Industrial production (% mom)
Current Account Balance (EUR bn)
ZEW Survey Current Situation
CPI (% yoy)
ZEW Survey Expectations
Markit Services PMI
Markit Manufacturing PMI
Reporting Publication
Bloomberg
Current value
month
date
consensus
9 2016
08/11/16
24.4
24.5
9 2016
08/11/16
-1.6
-0.5
10 2016
11/11/16
0.8
0.8
11 2016
15/11/16
13.8
8.1
11 2016
15/11/16
58.8
61.6
11 2016
24/11/16
110.4
110.5
9 2016
24/11/16
0.2
0.2
10 2016
29/11/16
-0.6
-0.8
10 2016
30/11/16
2.4
1.0
11 2016
30/11/16
-5.0
-5.0
11 2016
01/12/16
54.3
54.4
11 2016
05/12/16
55.1
55.0
10 2016
06/12/16
4.9
0.6
10 2016
07/12/16
0.3
0.8
10 2016
09/12/16
18.4
22.0
12 2016
13/12/16
63.5
59.0
11 2016
13/12/16
0.8
0.8
12 2016
13/12/16
13.8
14.0
12 2016
15/12/16
53.8
54.9
12 2016
15/12/16
55.5
54.5
Surprise
-0.1
-1.1
0.0
5.7
-2.8
-0.1
0.0
0.2
1.4
0.0
-0.1
0.1
4.3
-0.5
-3.6
4.5
0.0
-0.2
-1.1
1.0
Standardised
surprise
-0.4
-0.9
0.2
0.7
-0.5
-0.2
-0.1
0.5
1.4
-0.2
-0.1
0.1
2.0
-0.4
-1.4
0.5
0.2
0.0
-1.2
1.0
Quantile
rank
0.3
0.2
0.3
0.8
0.2
0.4
0.3
0.8
0.9
0.4
0.3
0.6
1.0
0.3
0.1
0.7
0.3
0.5
0.1
0.9
Sources: Bloomberg Finance LP, Deutsche Bank Research
The DB German Macro Surprise Index compares published economic data with market forecasts and thus
provides clues as to the direction of future forecast revisions.4
Heiko Peters (+49 69 910-21548, [email protected])
4
14 | December 21, 2016
See for details Focus Germany. August 4, 2014.
Focus Germany
Outlook 2017
Export Indicator 2016: demand impact remains weak – price impact turns negative
The Export Indicator identifies the effects on German exports of changes in global demand on the one hand,
and currency movements on the other (price impact).5
Heiko Peters (+49 69 910-21548, [email protected])
5
15 | December 21, 2016
See for details Focus Germany, March 3, 2016.
Focus Germany
Outlook 2017
Germany: Events of economic-, fiscal- and euro-politics
DX
Date
19 Jan
Event
ECB Governing Council meeting, press conference
23-24 Jan
Eurogroup and ECOFIN, Brussels
3 Feb
Informal European Council, Malta
20-21 Feb
Eurogroup and ECOFIN, Brussels
Remarks
Review of the monetary policy stance, given that at its recent meeting the
ECB announced a long and slow taper.
Debates on the economic situation and on proposals for an additional fiscal
stimulus.
Head of States and Governments from 27 Member States will debate on the
development of an EU 27
Situation in the euro area.
9 March
ECB Governing Council meeting, press conference
Review of the monetary policy stance.
9-10 March
European Council, Brussels
March
EU Heads of states and governments, Rome
Poss. debate on the implementation of strategies for the Single Market
(digital single market, capital market union and energy union).
Meeting to celebrate the 60s anniversary of the Treaty of Rome
15 March
Elections in the Netherlands
End-March
UK government
The right-wing PVV is currently the most popular party (~20%), marginally
above PM Rutte’s VVD conservatives. Polls suggest a government can be
formed without the PVV.
Triggering Art. 50 TEU? We still consider a notification by end-March the
most likely scenario.
Source: Deutsche Bank Research
Dieter Bräuninger (+49 69 910-31708, [email protected])
Germany: Data calendar
DX
Date
Time
Data
Reporting period
DB forecast
Last value
30 Dec 2016
8:00
Import prices (Index, sa) pch mom (yoy)
November
0.0 (-0.4)
0.9 (-0.6)
3 Jan 2017
3 Jan 2017
6 Jan 2017
6 Jan 2017
9 Jan 2017
9 Jan 2017
9 Jan 2017
9 Jan 2017
24 Jan 2016
24 Jan 2016
14 Feb 2017
14:00
10:00
8:00
8:00
8:00
8:00
8:00
8:00
9:30
9:30
8:00
Consumer prices preliminary (Index, sa), pch mom (yoy)
Unemployment rate (%, sa)
Retail sales (Index, sa), pch mom
New orders manufacturing (Index, sa), pch mom
Industrial production (Index, sa), pch mom
Trade balance (EUR bn, sa)
Merchandise exports (EUR bn, sa), pch mom (yoy)
Merchandise imports (EUR bn, sa), pch mom (yoy)
Manufacturing PMI (Flash)
Services PMI (Flash)
Real GDP (Index, sa), % qoq
December
October
December
November
November
November
November
November
January
January
Q4 2016
0.7 (1.7)
6.0
-1.0
-2.5
0.9
21.6
2.1 (3.0)
1.3 (1.8)
0.5
0.1 (0.8)
6.0
2.4
4.9
0.3
20.5
0.5 (2.0)
1.3 (1.8)
54.3
55.1
0.2
Sources: Deutsche Bank Research, Federal Statistical Office, Federal Employment Agency, ifo, Markit
Heiko Peters (+49 69 910-21548, [email protected])
Oliver Rakau (+49 69 910-31875, [email protected])
16 | December 21, 2016
Focus Germany
Outlook 2017
Financial forecasts
DX
US
JP
EMU
GB
CH
SE
DK
NO
PL
HU
CZ
Key interest rate, %
Current
Mar 17
Jun 17
Dec 17
0.625
0.625
0.875
1.125
-0.10
-0.10
-0.10
-0.10
0.00
0.00
0.00
0.00
0.25
0.25
0.25
0.25
-0.75
-0.75
-0.75
-0.75
-0.50
-0.50
-0.50
-0.50
0.05
0.05
0.05
0.05
0.50
0.50
0.50
0.50
1.50
1.50
1.50
1.50
0.90
0.90
0.90
0.90
0.05
0.05
0.05
0.05
3M interest rates, %
Current
Mar 17
Jun 17
Dec 17
0.99
0.98
1.23
1.48
0.06
0.05
0.05
0.05
-0.32
-0.30
-0.30
-0.30
0.37
0.33
0.34
0.35
10J government bonds yields, %
Current
2.62
Mar 17
3.00
Jun 17
3.60
Dec 17
3.10
0.07
0.05
0.05
0.00
0.26
0.20
0.25
0.35
1.42
1.35
1.45
1.60
Exchange rates
Current
Mar 17
Jun 17
Dec 17
EUR/USD USD/JPY EUR/GBP GBP/USD
1.04
117.93
0.84
1.23
1.03
117.00
0.90
1.14
1.00
120.00
0.89
1.12
0.95
125.00
0.90
1.06
EUR/CHF EUR/SEK EUR/DKK EUR/NOK EUR/PLN EUR/HUF EUR/CZK
1.07
9.72
7.43
9.03
4.40
310.98
27.02
1.06
9.46
7.46
9.08
4.53
316.25
27.00
1.04
9.39
7.46
9.05
4.51
317.50
27.00
1.00
9.25
7.46
9.00
4.55
320.00
26.50
Sources: Bloomberg, Deutsche Bank
17 | December 21, 2016
Focus Germany
Outlook 2017
German data monitor
Business surveys and output
Aggregate
Ifo business climate
Ifo business expectations
Industry
Ifo manufacturing
Headline IP (% pop)
Orders (% pop)
Capacity utilisation
Construction
Output (% pop)
Orders (% pop)
Ifo construction
Consumer demand
EC consumer survey
Retail sales (% pop)
New car reg. (% yoy)
Foreign sector
Foreign orders (% pop)
Exports (% pop)
Imports (% pop)
Net trade (sa EUR bn)
Labour market
Unemployment rate (%)
Change in unemployment (k)
Employment (% yoy)
Ifo employment barometer
Prices, wages and costs
Prices
Harmonised CPI (% yoy)
Core HICP (% yoy)
Harmonised PPI (% yoy)
Commodities, ex. Energy (% yoy)
Oil price (USD)
Inflation expectations
EC household survey
EC industrial survey
Unit labour cost (% yoy)
Unit labour cost
Compensation
Hourly labour costs
Money (% yoy)
M3
M3 trend (3m cma)
Credit - private
Credit - public
DX
Q4
2015
Q1
2016
Q2
2016
Q3
2016
108.5
104.2
106.8
100.7
107.8
101.8
103.1
-0.4
0.5
84.4
100.7
1.8
0.7
85.0
3.5
10.0
123.1
Q4
2016
Jul
2016
Aug
2016
Sep
2016
Oct
2016
Nov
2016
108.0
102.2
108.3
102.1
106.3
100.1
109.5
104.5
110.4
105.9
110.4
105.5
101.9
-0.8
-0.3
84.4
102.4
0.3
0.6
84.8
102.4
-1.5
0.4
100.8
3.0
0.8
104.1
-1.6
-0.3
105.7
0.3
4.9
104.8
1.4
6.3
122.7
-5.3
-0.1
124.6
1.9
-5.5
126.9
1.1
-4.6
126.1
1.0
-2.2
126.2
-1.3
1.6
128.4
1.9
129.0
129.6
-4.4
0.4
5.7
-6.1
0.7
4.5
-3.2
-0.3
9.4
-2.5
0.2
4.2
-2.1
0.5
-3.9
-2.5
0.0
8.3
-2.9
-1.5
9.4
-2.5
2.4
-5.6
-1.2
0.2
-0.9
-1.1
59.6
2.1
0.5
-0.1
61.5
-1.4
0.4
-1.2
65.6
2.6
-0.1
1.4
62.3
2.8
-1.6
0.0
19.5
-0.2
3.6
1.9
21.6
0.2
-1.0
-0.7
21.1
3.9
0.5
1.3
20.5
6.3
-24.0
1.1
109.7
6.2
-39.3
1.2
108.4
6.1
-29.3
1.2
108.2
6.1
-19.3
0.9
109.0
6.1
-7.0
1.0
108.1
6.1
-7.0
0.9
108.6
6.1
-1.0
0.9
110.1
6.0
-13.0
0.8
110.7
111.1
0.2
1.2
-2.3
-12.6
44.8
0.1
1.1
-2.8
-14.6
35.1
0.0
1.0
-2.6
-6.5
46.9
0.4
1.1
-1.7
2.9
47.0
0.4
1.3
-2.0
0.2
46.6
0.3
1.0
-1.6
4.1
47.1
0.5
1.1
-1.4
4.7
47.3
0.7
1.1
-0.4
9.1
51.4
19.3
47.1
4.0
1.5
5.3
-2.4
3.6
1.7
6.2
3.0
4.9
4.8
7.2
1.6
6.4
2.7
7.4
5.4
11.8
6.8
1.7
2.4
1.9
2.1
2.6
3.8
0.4
1.9
0.7
1.5
2.3
2.6
9.3
7.8
7.2
6.6
2.0
-9.1
2.7
9.7
2.6
-0.1
7.2
7.1
2.2
9.5
6.6
6.4
2.6
-0.1
5.3
2.7
11.7
7.4
7.2
2.0
9.1
Dec
2016
85.7
1.5
6.0
-5.0
3.0
4.2
% pop = % change this period over previous period.
Sources: Deutsche Bundesbank, European Commission, Eurostat, Federal Employment Agency, German Federal Statistical Office, HWWI, ifo, Markit
18 | December 21, 2016
Focus Germany
dbStandpunkt
In “dbStandpunkt” we analyse and comment on financial and economic
issues, raise awareness of the key issues and contribute to the discussion.
Through dbStandpunkt, we aim to cut through the day-to-day noise and
focus on the key strategic questions faced by Germany in the 21st century.
 Beacon of stability: The foundations
of Germany’s success ............................................. December 15, 2016
 The dark sides of QE: Backdoor
socialisation, expropriated savers
and asset bubbles ..................................................... November 1, 2016
 A darker Europe ............................................................... June 23, 2016
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 The ECB must change course ........................................... June 8, 2016
 Influx of refugees: An opportunity for Germany ...... November 13, 2015
 Misguided policy raises risk of housing bubble ................. May 28, 2015
 Case for higher investment in infrastructure –
despite questionable ”gap analysis” .......................... December 5, 2014
 Temporary immigration boom:
A wake-up call for politicians? ........................................... July 28, 2014
 The economics of sanctions:
The West can afford to be tough ....................................... May 16, 2014
 Can Hollande pull off a Schröder
and will it work? ......................................................... February 24, 2014
 Grand coalition – poor policies ................................ December 16, 2013
 Criticism of Germany’s CA surpluses
largely unfounded .................................................... December 12, 2013
 Energiewende 2.0 –
don't risk competitiveness ....................................... November 26, 2013
 Minimum wage at EUR 8.50:
The wrong policy choice ............................................ November 4, 2013
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