01 November 2006

EZA 764 Report:

Germany – public economic forecasting in perspective

Germany – public economic forecasting in perspective On 18Oct the German industry association DIHK presented its economic outlook followed by the Economic Research Institutes 19Oct. Both forecasts indicate some slowing of the German economy next year to GDP growth rates of around 1.5% with exports and investment being the remaining drivers of growth. While the DIHK forecast is based on a bottom-up survey among 25k companies, the institutes’ forecasts are a combination of top-down model-based forecasting with detailed knowledge of sector and process details. In contrast to previous findings there is now a convergence between the institutes’ model based forecasts and the empirical forecast of the DIHK. This bolsters the assessment that Germany has finally settled to a sustainable growth trajectory, amidst policy related slowing next year

Asset conclusions: broad consensus on sustainable growth from different approaches bodes well for the sustainability of German growth, hence profit growth and higher interest rates.

© Graham Bishop