The German economy continued to expand at the start of the year. Even though
recent PMI (Composite Feb: 57.6 vs. Jan: 59) and ifo (Climate Index Feb: 115.4
vs. Jan: 117.6) survey results for industry showed a decline for February, they
continue to be at high levels. Since the end of 2017, current assessment and
expectations with respect to exports have deteriorated somewhat, likely in
reaction to the euro’s appreciation of around 10% against the USD (year-over-
Hard economic data such as industrial production (- 0.1%
mom) and incoming orders (-3.9% mom) weakened as well in January. On
balance, however, there are some indications that companies will ramp up
capacity-increasing investment. In light of the economic environment, but in
particular, the ongoing recovery of the euro area, we currently do not see any
need to adjust our growth forecast of 2.3% for the current year. This is all the
more true, as the Germany economy started the new year with a growth
overhang of 1%.
Despite the weakness in the second half of 2017, private
consumption and investment look set to be the key drivers in 2018.