The ifo business sentiment index reached a new all-time high in November. As
capacities become scarcer and the euro appreciates, we expect growth to slow
somewhat in 2018 in comparison to 2017. While the average for the year as a
whole will probably remain unchanged, at 2.3%, this unchanged growth rate is
largely due to a growth overhang of c. 1 pp at the beginning of 2018. In 2019,
the growth rate is likely to decline to less than 2%.
We already voiced concerns ahead of the Bundestag elections that the new
government (just like its predecessor) might not pay sufficient attention to urgent
challenges such as digitalisation, demographics and globalisation as the labour
market situation is favourable (for now!) and the budget looks set to be in the
black for the fifth time in a row in 2018.
Now that forming a government has
turned out to be unexpectedly difficult (from our vantage point, the outcome is
indeed undetermined), our concerns have increased.