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German Economy to Grow by 2.7%

Business morale regarding current conditions has reached a record-high as 54%.Business morale regarding current conditions has reached a record-high as 54%.

Germany’s DIHK Chambers of Industry and Commerce raised its 2018 growth forecast for the German economy to 2.7% from 2.2%, it said on Wednesday, pointing to a broad-based upswing in Europe’s biggest economy which is gaining more pace.

“Companies have never been more upbeat,” DIHK said in its latest business survey which showed business morale improved further at the beginning of 2018, Reuters reported.

German companies are hiking investment plans at an unprecedented pace as many reach capacity bottlenecks and a lack of skilled labor threatens to choke off more growth, DIHK said.

According to the DIHK survey of 26,000 managers, business morale regarding current conditions reached a record-high as 54% of firms reported good conditions, 40% said things were satisfactory and 6% said things were bad.

Asked about the biggest threat for future growth, most companies pointed to shortages of skilled labor and rising labor costs. “The shortage of skilled labor is turning into a real obstacle for future growth,” DIHK said.

 Industrial Output Falls in December

Meanwhile, AFP reported on Wednesday that German industrial production lost some momentum in December, but not enough to cloud the generally bright outlook for Europe’s largest economy.

Output slipped 0.6% month-on-month in December, after rising by 3.1% the previous month, federal statistics authority Destatis said in data adjusted for price, seasonal and calendar variations.

Looking at the different sectors, capital goods makers reported a drop in output of 2.6% in December, while consumer goods production fell by 0.5%.

By contrast, output of intermediate goods grew expanded by 1.5%.

Elsewhere in the economy, energy output increased 1.4%, while construction output shrank by 1.7%.

On Tuesday, Destatis had reported a rebound in industrial orders for December.

And analysts see the German economy continuing to perform well this year, with businesses, consumers and investor all brimming with confidence, according to recent surveys.

Chancellor Angela Merkel’s difficulties to form a new government after inconclusive September elections have done little to sour such confidence, analysts say.

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