German economy remains on growth path

According to the current issue of the Bundesbank’s Monthly Report, Germany’s economy is still on a growth path. The economists write that the positive situation is being boosted notably by activity in the industrial sector, which is benefiting from lively demand from within Germany and elsewhere. Sales in this sector, according to the report, were up very strongly on the month in January 2017 (by 3¾% after seasonal adjustment). German industrial enterprises’ output rose just as fast, with car manufacturers, especially, stepping up their production particularly strongly.

Weak incoming orders not a cause for concern

By contrast, new industrial orders fell off exceptionally sharply in January (by 7¼% on the month after seasonal adjustment). Domestic new orders diminished particularly strongly, but orders from the euro area and elsewhere were also down. According to the Monthly Report, however, these falls are not yet a cause for concern. The decline was to be seen in the light of the very strong growth rates in the fourth quarter of 2016, the upbeat sentiment in the manufacturing sector, the high level of capa¬city utilisation and the recent high volatility of new orders. In addition, excluding large orders, the decline would be 3% and thus not nearly as considerable.

Positive trend in the labour market

According to the report, the labour market situation is looking even brighter than previously assumed. The Bundesbank’s experts write that a data processing error on the part of the German Federal Employment Agency made it look as if labour market dynamics were subsiding. The revised data indicate that the number of per¬sons in work in January 2017 was up by 609,000, or 1.4%, on the same month last year. According to leading employment indicators, such as the Federal Employment Agency’s Jobs Index, it appears as if the coming months could likewise see a considerable uptick in job creation.

Consumer prices up

Consumer prices reportedly went up slightly in February 2017, by 0.2% on the month after seasonal adjustment. Weather conditions forced consumers to spend more at the till for vegetables, in particular. The prices of other goods and services, including rents, on the other hand, increased only slightly on the whole.

Other topics

Other topics covered in the Monthly Report include Germany’s balance of payments for 2016, focusing on the rise in Germany’s TARGET2 claims, and the federal states’ cyclical adjustment with regard to the "debt brake".