The German economy is growing at its fastest rate since 2000 and companies have begun to re-hire after five years of downsizing.
The German government will on Friday add just less than a percentage point to its gross domestic product growth estimate for this year, underlining the robustness of the recovery under way in
A senior government official involved in compiling the new forecast told the FT that the government had yet to settle on a precise figure, but that it would be at the top end of a 2-2.5 per cent range, up from the 1.6 per cent forecast made in January.
Revisions made in August to historical GDP statistics warranted adding half-a-percentage point to the January estimate, the official said. “And that is just the so-called basis effect. The actual economic dynamic is also doing much better than we had anticipated.”
Adjusted for the lower number of working days compared with 2005, a 2.4 per cent forecast would translate into GDP growth of 2.6 per cent, the fastest rate of growth since 2000.
Economists have been surprised by the vigour and breadth of the recovery in
Companies have begun to hire more staff. The number of employees in the country has risen steadily from 38.3m to 39m between January and August.
“Private consumption is the one indicator that is not quite where it should be,” the official said. “But given the improvement on the investment front, I would expect consumption to rebound shortly.”
Agreeing on a joint 2007 forecast could prove difficult. Not only is the range of estimates, from 0.8 to 1.7 per cent, wider than for 2006, but the differential has also increased recently.
This month, the Halle-based IWH institute cut its 2007 growth forecast to 0.8 per cent while the RWI, in Essen, raised its to 1.7 per cent, largely because of diverging expectations regarding the economic impact of a three-point rise in value-added tax planned for next January.
Economists agree that the tax rise will hit growth in the first quarter. Yet opinions vary as to how long-lasting the impact will be, with an increasing number of experts now expecting the economy to weather the blow and recover in the course of the year.
The government official said the economics ministry would on Friday raise its 2007 growth forecast, currently at 1 per cent, by up to half-a-point.
Source: Financial Times