Last year saw employment reach yet another record high and unemployment diminish further, again reflecting the healthy macroeconomic situation in Germany. Wage growth was marked, while inflation remained subdued, leading to a distinct rise of 2.2% in real disposable income. It was not surprising, then, that private consumption was the main engine driving the economy last year.
This year, too, brisk domestic demand will probably fuel economic activity, which is set to follow a clear upward trajectory despite the slight upturn in risk. Activity will be stimulated by both the very low energy prices and expenditure on accommodating and providing for refugees. But considering these tailwinds and the fairly favourable conditions overall, the projected growth rates aren’t actually all that strong.