Economic climate in Germany - statistics & facts
Germany is the largest economy in Europe, known for its internationally successful industries. There have been challenges to the economic market however, such as the recent inflation and the Russia-Ukraine war, to name a few. The climate influences the development of such key areas as employment, the job market, financial investment decisions, how businesses structure their work and workforce. It also reaches further down to consumer decisions, spending, and attitudes.
It is not possible to predict the exact trajectory of any economy as it is dependent on so many unforeseeable factors. When looking at the indicators available, it does appear that Germany is set to make an economic recovery in the coming years. This will result in a decrease in inflation rates, a growing GDP, and decreasing unemployment figures.
Consumer confidence
Experts observing and evaluating the German economy use so-called early indicators (Frühindikatoren) as one way to assess the state of the economy. These include economic barometers from various sources, as well as business climate balance assessments and the consumer confidence index (CCI). The latter measures financial expectations of consumers based on their answers to a survey. The underlying basis for the CCI is the assumption that optimistic consumers will spend more, while the opposite is true for respondents with a pessimistic outlook on their financial circumstances. If the economic climate influences consumer confidence, in turn, consumer confidence and subsequent purchasing power influence economic development. Since summer 2021, however, consumer confidence has been decreasing. It took a large hit in September 2022 due to the energy crisis and high prices caused by inflation, but it has been generally rising since.GDP and inflation levels
Other economic indicators used by experts are present (Präsenzindikatoren) and late (Spätindikatoren) indicators. Present indicators include the gross domestic product (GDP), import and export volume in the country, as well as the change in producer prices. Germany's GDP took a dip of almost 4.6 percent in 2020 when the COVID-19 pandemic began and shrunk again in 2023, but this time by just 0.31 percent. In the coming years, however, growth is expected. The shrinking of GDP is due to several factors including the weakening economic situation of Germany’s main trading partners which has resulted in a decrease in exports. Another sign of the state of the economy is so-called late indicators which include unemployment levels as well as inflation and tax revenue. When looking at the annual unemployment rate, figures were decreasing steadily until 2020. But since then, they have increased and 2024 is predicted to see a six percent of people unemployed, this is the highest rate since 2016. In 2022, Germany saw a very sharp increase in inflation levels which have continued to be high in 2023. They are however forecast to decrease over the next few years, suggesting an economic recovery.It is not possible to predict the exact trajectory of any economy as it is dependent on so many unforeseeable factors. When looking at the indicators available, it does appear that Germany is set to make an economic recovery in the coming years. This will result in a decrease in inflation rates, a growing GDP, and decreasing unemployment figures.
