Germany growth forecasts: Nordea

Nordea Research has released growth forecasts for Germany. It notes...

• We have raised our growth forecast for Germany quite substantially to 1.7% for this year (from 1.1%). 
  
  
• It seems that we had become too pessimistic for investments last summer when business sentiment went down in the wake of the Russian-Ukrainian crisis and GDP virtually stagnated for half a year. In Q4, things clearly improved. 
  
  
• Investment both in construction and in machinery and equipment rose on top of a strong increase of privateconsumption. 
  
  
• Growth is to back, underpinned by strong fundamentals, lower oil prices and interest rates, and theweaker EUR. 
  
  
• Also for next year, we expect broad based growth between 1½% and 2%. That means three years (2014 to 2016) of expansion above the potential rate that we estimate to be slightly above 1%.
  
  
• On the back of a robust labour market, consumer spending will continue to be the main growth driver. We expectsome further increase of wage growth, both from negotiations and the introduction of a statutory minimumwage of EUR 8.50 per hour at the start of this year. 
  
  
• Most of the 3.7m employees concerned work in the service sector. We expect a minor impact on employment andconsumer prices.
  
  
• We expect consumer prices to increase very moderately (0.4% this year), but still slightly above the Euro-areaaverage, as in 2013 and 2014. Price competitiveness of German companies is eroding only very slowly, much tothe regret of European deficit countries. 
  
  
• 2014 was actually a record year for exports, the trade and the current account balance. Also for this year, we expect net foreign trade to contribute positively to GDP growth.