With a growth rate of probably 2.3% in 2017, Germany delivered the main
positive surprise in the industrial world. The euro area did better than expected,
too. In 2018, German GDP looks set to expand by 2.3% again. If this forecast
materialises, Germany will grow at an above-potential rate for the fifth year in a
The boom is driven by investment activity, which is fuelled by rising export
demand and considerably higher capacity utilisation, and by continuously strong
employment growth. Higher employment and a more significant increase in
effective wages should lead to consumption growth of almost 2%.
Construction investment looks set to accelerate in comparison to 2017, driven
mainly by residential construction. Nevertheless, the gap between supply and
demand for residential real estate is likely to widen further; at the moment, about
1 million residential units are lacking.
The price pressure will abate slightly at
best; in 2017, house prices rose by 6% and flat prices even by 10%. A lack of
building land, insufficient capacities and inadequate regulation restrict supply.
As domestic activity is booming, imports look set to rise more strongly than
exports, even though the latter are increasing, too. The contribution of net
exports to GDP looks set to be near zero once again.