Joint Economic Forecast – Spring 2017: Upturn in Germany Strengthens in Spite of Global Economic Risks

On 12 April 2017, the Joint Economic Forecast Project Group presented its Spring Forecast to the press in Berlin. In its estimation, the German economy is already in the fifth year of a moderate upturn. Capacity utilisation is gradually increasing, and aggregate production capacities are now likely to have slightly exceeded their normal utilisation levels. However, cyclical dynamics remain low compared to earlier periods of recoveries, as consumption expenditures, which do not exhibit strong fluctuations, have been the main driving force so far. In addition, net migration has increased potential output, counteracting a stronger capacity tightening. Gross domestic product (GDP) is expected to expand by 1.5 % (1.8 % adjusted for calendar effects) and 1.8% in the next year. Unemployment is expected to fall to 6.1 % in 2016, to 5.7 % in 2017 and 5.4 % in 2018. After an increase in consumer prices of only 0.5 % in 2016, the inflation rate is expected to rise to 1.8 % in 2017 and 1.7 % in 2018. The public budget surplus will decline only modestly. Public finances are stimulating economic activity in the current year slightly and will be cyclically neutral in the year ahead. The public budget surplus will be reduced only modestly. Public finances will stimulate economic activity somewhat in the current year and will be cyclically neutral in the year ahead.