Germany Cautious on Growth Outlook

The German government is sticking to its growth outlook for Europe’s biggest economy despite solid economic data and upbeat sentiment indicators, Economy Minister Brigitte Zypries said in a Reuters interview.

Germany’s central bank and leading economic institutes have raised their estimates for German gross domestic product growth for this year and next, pointing to a broad-based and self-reinforcing upswing propelled by vibrant domestic demand.

The Bundesbank last week raised its growth forecasts for the German economy to a workday-adjusted 1.9% in 2017 and 1.7% in 2018. Both estimates were 0.1 percentage points higher compared with the previous forecasts.

“I think we should stay realistic. And that’s why I think our spring forecast for growth is still good and correct,” Zypries said.

The government said in April it expected GDP growth of 1.5% in 2017 and 1.6% in 2018 on a non-adjusted basis. “We’ll stick to this because we should not underestimate the difficulties that the global economy is currently facing,” Zypries said, referring to the threat of rising protectionism and US President Donald Trump’s “America First” agenda. “The reality is that trade relations with the United States are not that easy at the moment,” the minister said.

Zypries, a senior member of the center-left Social Democrats, said that the dispute with the US about trade and climate policies was complicating efforts by the German G20 presidency to reach a joint statement for the G20 summit in Hamburg next month.

“The chancellor and the government as a whole are working very hard to establish unity for this summit,” Zypries said. “I hope that we’ll succeed . But nobody can tell at the moment because all sides are still working on the different chapters.”

“It is therefore our wish to get a unified G20 declaration, a unanimous declaration on trade as well as on other issues. We are working on that. And I hope that we are successful.”

Industrial Output Rises

German industrial production growth beat forecasts in April as manufacturing output rose for the fourth straight month, underpinning expectations of robust economic growth in the second quarter, MarketWatch reported.

Industrial output in Europe’s largest economy increased by 0.8% from March, adjusted for seasonal swings and calendar effects, the economics ministry said. Economists polled by The Wall Street Journal had forecast a 0.5% rise.

Industrial output was up 2.9% from April last year, in calendar-adjusted terms. “Solid developments in industrial orders and turnover, as well as excellent business sentiment are pointing to a continuation of the upswing in manufacturing and the construction sector,” the ministry said.

German business sentiment hit a record high in May, according to Germany’s Ifo institute, which described the mood among companies as “euphoric”.

Economists at Deutsche Bank lifted their forecast for German manufacturing output growth in 2017 to 1.5% from 0.5% in real terms, earlier this week.

Unemployment Drops

German unemployment has fallen again as the arrival of summer weather goes hand in hand with a pick-up in hiring in Europe’s biggest economy. With companies reporting full order books, a trend reversal is not in sight, DW reported.

The number of jobless people in Germany dropped in May, the Federal Labor Agency, or BA, reported. The Nuremberg-based office said it registered 2.498 million unemployed people in the country in May, bringing the number below the psychologically important threshold of two and a half million.

BA officials noted the May figure was the lowest for this month since 1991 and marked a dip of 71,000 people month on month.

The country’s jobless rate fell by 0.2% to 5.6% in the month under review, the employment agency announced.

“Conditions for economic growth are good, and the labor market had developed accordingly,” BA President Detlef Scheele said in a statement, adding that there was also a high number of vacancies.

Adjusted for seasonal effects, the number of jobless people in Germany fell by 9,000 to 2.536 million.