BERLIN: The German Chambers of Commerce raised its forecast for economic growth in Europe’s largest economy this year to 1.5% from 1.3%, after its latest survey showed German companies were upbeat about their business expectations.
However, the chamber’s 1.5% growth forecast is still more pessimistic than the government’s forecast of 1.7% growth for 2016.
German firms are more optimistic in their outlook due to strong consumption and a booming construction sector, according to the survey of more than 24,000 local companies, reflecting a strong domestic economy that is helping to offset weak exports.
“Consumers’ buying mood will carry the economy through the year,” the chamber, or DIHK, said. “Trade and consumer-related services companies are particularly optimistic. The construction sector this early summer is extraordinarily optimistic about the future course of the year.”
Companies’ business outlook has brightened, with 25% of them seeing improvements ahead, up from the 24% in the previous survey at the beginning of the year.
About 13% of those surveyed said they thought Germany’s economic situation will worsen, unchanged from the previous survey. The percentage expecting the situation to remain the same fell to 62% from 63%.
The assessment of their current business situation deteriorated slightly from the previous record high, but sentiment remained good in a long-term comparison, mainly due to low oil prices and favorable financing conditions, DIHK said.
Of those polled between the end of March and mid-May this year, 43% described their business situation as good, down from 46% previously, while 48% said they were satisfied, up from 46% in the winter. Only 9% said they weren’t doing well, compared with 8% previously.
DIHK said sentiment among German exporters had deteriorated somewhat from winter because of various political crises or recessions in global economies, as well as China’s economic restructuring process.
The number of German respondents predicting that their export activities would rise fell to 29% from 32%, while 59% said the situation would remain unchanged, up from 56% previously. The proportion of those expecting it to deteriorate remained at 12%.
The DIHK forecasts that German export growth will slow to 2.0% from 5.4% in 2015. This is much below what the DIHK calls a “normal” annual export growth level of 6%.
Public consumption is seen up 3.0% this year, after a 2.4% rise in 2015, while private consumer spending is forecast to rise by 2.0%, after a 1.9% increase in 2015 and a 0.9% rise in 2014.
