The Shifting Shape Of Growth
An array of recent data releases reinforce our long-held view that the shape of German GDP is changing (see 'Stage Set For Stronger Consumption', June 6), albeit at a gradual pace. Slower export growth, a symptom of weaker demand from Asia (particularly China), is being compensated by a strengthening consumer story, although the impact that this shift will have on pace of headline growth is hard to call. At present our 0.5% and 1.9% real growth forecasts for 2013 and 2014 are slightly above Bloomberg consensus estimates, but the divergence in these estimates, which range from 0.5% to 3.2% in 2014, highlight the level of uncertainty surrounding Germany's recovery. Even though we are forecasting stronger private consumption, with exports comprising around 50% of GDP this does not necessarily translate into strong headline growth, and we do not expect real GDP to exceed the 2% mark for the foreseeable future.
Private Consumption: Recent retail sales figures suggest that improving consumer confidence readings are feeding through to consumption patterns, with the month-on-month seasonally adjusted reading up 0.8% in May, and the year-on-year three month moving average measure up 0.3%, the fastest expansion since August 2012. If this correlation between sentiment and consumption continues holds, the next few quarters will see stronger household expenditure, as the GfK consumer sentiment survey hit a six-year high in June, and consumers' propensity to spend remaining high.
|Germany - House Price Index|