German Institutes review in high forecasts with still fragile economy

O ifo Institute of Munich today revised its forecast of growth of German Gross Domestic Product (GDP) to 1.4% this year, against 0.8% in the previous report.

Economist Timo Wollmershauser, responsible for the Institute’s forecasts, quoted by the France-Presse Agency (AFP), pointed out that Germany “continues its recovery”, in particular due to the impact of public expenditure on infrastructure, environment and defence, as well as a more industry-friendly international environment.

The same reasons were highlighted by the RWI Institute, which now foresees a growth of 1.3% this year, against 0.8% released in June, while the IfW points to the same value.

The reviews come after that carried out by Berliner DIW, which predicts an increase of 1.2% this year, against the 0.5% released in spring.

Despite the prospects for improvement, the consumption of families remains weak, being contained by a still fragile labour market and uncertainty.

RWI’s macro-economic manager Torsten Schmidt stressed that “structural problems have not disappeared”, pointing to energy costs, overbureaucratic costs and low competitiveness.

“ Without private investments and consumption, recovery is still fragile”, says AFP.

After years of recession, industrial indicators have shown signs of improvement, as shown by data from the Federation of German Engineering Companies (VDMA) today released that point to a similar increase in July 2%.

“Mechanic construction shows once again its strength in exports,” which grew 4% in the same period, VDMA’s chief economist Johannes Gernandt, also quoted by the French news agency, said.

RWI also highlighted the impact of drought in summer and the effects of low water levels on the Rhine, which affected river transport.

In the chemical sector, the VCI federation remains cautious, despite the recovery in production and the increase in turnover in the second quarter.

The federation attributed these improvements to temporary stress-related factors in the Middle East.

For this year, the IVC maintains the forecast of a retreat of 1.5% in chemical and pharmaceutical production, pointing to a still weak use of production capacity and high energy costs.