Germany Macros

In Q2 2016, the German economy slowed to a 0.4% quarterly growth,

restrained by shrinking fixed investment and construction. Conversely,
public and personal consumption continued to grow, albeit lower than in Q1
2016, and robust net exports were a bright spot. In Q3 2016, Europes largest
economy grew at a stable pace.

Unemployment control steady at a record-low level in August

and consumer sentiment was upbeat in September, indicating household
spending as a key growth engine. July witnessed declines in exports and
industrial production and Septembers decline in PMI are signs for caution,
Septembers jump in business confidence was welcome news.

Political Landscape - In September, Chancellor Angela Merkels Christian

Democratic Union party (CDU) suffered vital setbacks in two regional
elections, losing voters to the populist and right-wing Alternative for
Germany party (AfD) over voters discontent with Merkels migration policy.

This indicates fragmentation of Germanys political landscape and will

increase pressure on Merkel, who will likely announce in December if she is
going to run for a fourth term in next years elections.

The final seasonally adjusted Markit/BME Germany producing PMI rose

to 54.3 in September 2016 as compared to 53.6 in August, in line with
preliminary estimates. This was the best figure since June 2016 and therefore
the twenty second straight month of growth, as growth of recent business
accelerated and new export orders enlarged at quickest pace since early-
2014.

Also, the rate of job creation rose any and was the sharpest since the
beginning of 2012.

On the costs front, input prices rose for the third month running whereas the
rate at which output costs rose was marginal. Manufacturing PMI
in Germany averaged 50.94 from 2008 till 2016, reaching an all time high
of 62.70 in February of 2011 and a record low of 32 in Jan of 2009.
Whats next?

The growth dynamics within the domestic economy stay intact and
can sustain value this year. Personal consumption is taking advantage of low
interest rates, muted inflation and a powerful labour market. Rising state
incomes because of record tax revenues and low interest rates enable the
government to government to boost spending while running a fiscal surplus.

However, the external sector is predicted to perform poorly in context of

subdued world demand and robust imports. Our group expects GDP to
grow 1.7% this year, that is unchanged from last months forecast. For
2017, we forecast a 1.3% growth.

The key policy measure is an increase in public investment mainly in

infrastructure that amounts to EUR 13.5 billion till 2018, though the
government remains committed to its goal of achieving a balanced
budget throughout

Key Economic Indicators for Germany

GDP
Latest: 0.4% for 2016Q2
Previous: 0.7% for 2016Q1
Industrial Production
Latest: 2.5% for Aug. 2016
Previous: -1.5% for Jul. 2016

Foreign Trade
Latest: 22.2 bil for Aug. 2016
Previous: 19.4 bil for Jul. 2016

Employment Situation
Latest: 6.1% for Sep. 2016
Previous: 6.1% for Aug. 2016
Next Release: Oct 31, 2016