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Think tank ifo raises German GDP growth forecast on strong private consumption

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Think tank ifo raises German GDP growth forecast on strong private consumption

The ifo Institute raised its growth forecast for Germany, citing a strong economy driven by private consumption.

GDP is now expected to grow 1.9% in 2018 and 2019, compared with a previous projection of 1.8% for both years. For 2020, the German economy is estimated to grow 1.7%.

"Germany's economy is currently performing strongly. Its main drivers this year and next will be private consumption, which will be boosted by rising employment and sharp increases in income," said Timo Wollmershäuser, head of business cycle research and forecasting at ifo.

A better-than-expected quarterly expansion of 0.5% was recorded in the second quarter, compared with 0.4% growth in the prior quarter, data from Germany's Federal Statistical Office showed in August.

On the trade front, Germany's export sector is seen continuing to benefit from a "favorable" world economic climate, Wollmershäuser said, adding, "[T]his effect will fade gradually over the forecasting period."

"This forecast is based on the assumption that the truce reached in the trade war between the EU and the USA will last; and that there will be an orderly Brexit," Wollmershäuser said.