Germany trims 2018 growth forecast but remains upbeat

Berlin (Reuters): The German government yesterday lowered its forecast for 2018 growth to 2.3% from 2.4% previously and expressed concern about international trade tensions, but insisted the “economy remains buoyant and the upturn is continuing”.

The news of the trimmed forecast, confirming news reported by Reuters, came after the Ifo economic institute’s business confidence measure on Tuesday showed a fifth consecutive fall in April.

Economy Minister Peter Altmaier said that, despite the dip in the Ifo index from high levels, Germany’s upswing was broad.

“Germany is doing well economically, actually we are doing very well,” Altmaier told a news conference. “We see that German manufacturers’ order books are well filled.”

He said one million more people would have jobs in 2019 than in 2017, while unemployment would hit a record low. That increase in new jobs combined with rising incomes means consumer demand is likely to be strong, the ministry said. It added that corporate investment would also remain dynamic.

Surveys suggest that growth in Germany and the broader euro zone has steadily slowed since January as a result of euro strength and fears of a trade war between China and the United States.

The Economy Ministry said foreign trade was unlikely to make a significant contribution to growth.

Altmaier expressed concern about developments in international trade, but added that it would be negligent to end up in a trade conflict with the United States, which has imposed tariffs on imports of steel and aluminium from some countries.

Speaking days before Chancellor Angela Merkel travels to Washington to hold talks with US President Donald Trump on the issue, Altmaier said: “I remain convinced that it would be careless to stumble into a trade conflict, so I think a consensual solution should take precedence over a confrontational one.”

Trump has given the EU until 1 May to negotiate permanent exemptions from the tariffs.

Asked whether the updated government growth forecasts included the scenario of a so-called ‘hard Brexit’, Altmaier said: “We don’t know whether there will be a hard Brexit. We are all interested in avoiding it and the EU Commission is negotiating with Britain in this spirit. Even if these negotiations were not to lead to the desired outcome, an impact on economic growth this year would be unlikely. So we are safe with the forecast for this year.”w