Germany - Sectoral Outlook - investment and export related sectors dominate modest recovery
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SummarySluggish economic recovery remains dominated by investment and export related sectors • Modest growth recovery continues in Germany in Q2 2004 — slightly above 1.5% annualised growth. • Growth remains biased towards investment and exports, while consumption remained unchanged. • Best performing sectors are manufacturing, mechanical and electrical engineering in particular • Retailing recession continues, construction in depression; banking stagnant. • No signs of acceleration in the second half of 2004 with growth relying on exports and — to a lesser extent — investment. • Outlook for consumption improving marginally due to lower health care contributions and some stabilisation in labour market • Conclusions for interest rates: weak consumption puts lid on pricing power, hence no need for higher interest rates at the moment • Fiscal policy: tax intake likely to lag recovery, since exports less tax-intensive than consumption
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© Graham Bishop
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