Buoyant Germany brightens euro-zone prospects

Data this week confirmed that the euro-zone had a very good Q3, with a 0.6% rise in quarterly GDP pushing the annual growth rate up to 2.5% – the highest since early 2011. This was stronger than the 2.3% expansion recorded in the US and significantly better than the UK’s 1.6% growth. The country breakdown revealed that all of the region’s major economies did well, with Germany the standout performer. Following the Q3 data, we have nudged up our forecast for German GDP growth in 2017 to 2.5%. And the outlook seems to have improved too. The business surveys continue to go from strength to strength, while the labour market recovery seems to be putting some upward pressure on wage growth. And we doubt that political uncertainty while coalition negotiations continue will have much of an economic impact. As a result, we have revised our forecast for German GDP growth in 2018 up to 2.3%.