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German GDP (2021)

Provisional data showing that Germany’s GDP increased by 2.7% last year and news that it shrank in Q4 underlines that its recovery has lagged many of its peers, including the US, France and the UK. We think that German GDP will expand by less than the consensus expects this year too.
Andrew Kenningham Chief Europe Economist
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European Economics Update

Answers to your questions on the ECB

We held a Drop-In today to discuss our views on the ECB and what the chances are of a further hawkish surprise in the coming weeks. (You can see an on-demand recording here.) This Update answers several of the questions that we received, some of which we couldn’t answer during the event.

24 May 2022

European Economics Update

Rising interest costs add to pressure on EZ households

We estimate that euro-zone households’ debt interest payments will quadruple as a share of income over the next couple of years as the ECB raises its policy rate. This will put yet further strain on households which are already struggling with higher costs and as such weigh on economic growth. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

24 May 2022

European Data Response

Euro-zone Flash PMIs (May)

The small fall in the euro-zone Composite PMI in May suggests that activity is holding up better than we had feared. But the services rebound is likely to run out of steam amid high inflation and the drop in new orders bodes ill for industry. So GDP growth is still likely to be weak for much of this year. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

24 May 2022

More from Andrew Kenningham

European Economics Update

ECB likely to raise rates to zero in 2023

With pandemic-related inflationary pressures proving a bit more intense and persistent than we had anticipated, and policymakers sounding more willing to tighten policy, we think the ECB is most likely to end net asset purchases in December 2022 and raise its deposit rate to zero by end-2023. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

12 January 2022

European Chart Book

Inflation to remain above target in 2022

Euro-zone inflation reached 5.0% in December, which is likely to be the peak. Unless oil and gas prices surge again in 2022, which seems unlikely, energy inflation will plummet – we forecast the contribution of energy to headline inflation to drop from 2.5 percentage points in December 2021 to around zero in December 2022. But we don’t expect to see a downward trend in core inflation. The full impact of high input prices has probably not yet fed through to core goods inflation, which was already at a record high at the end of last year. In the near term, the Omicron variant could lead to a bigger reduction in global supply than demand, adding to inflationary pressures. And if demand rebounds when Omicron cases start to fall, as we expect, it could push up wage growth and services inflation. We forecast core inflation to average a little over 2% this year, which would put more pressure on the ECB to prepare the ground for interest rates to rise in 2023.

11 January 2022

European Data Response

German Industrial Production (November)

The unexpected decline in German industrial production in November increases the chance that GDP fell in the last quarter of 2021. And with the Omicron variant likely to hit Germany hard in the coming weeks, the outlook for Q1 is also looking poor.

7 January 2022
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