Record Low Unemployment and a Stronger Euro Boost Economic Forecast for Germany

Following its recovery from the Global Recession, Germany has often led the Eurozone in economic recovery indicators. This week, Germany’s central bank, the Bundesbank, improved its own estimate for the German economy for 2015 and beyond thanks to the nation’s continuing record low unemployment and a stronger Euro.

The German central bank now predicts gross domestic product (GDP) to expand by 1.7 percent by the end of 2015, and 1.8 percent by the end of 2016. In December, the Bundesbank had predicted growth of just 1 percent for 2015 and 1.6 percent for 2016.

Following its recovery from the Global Recession, Germany has often led the Eurozone in economic recovery indicators. This week, Germany’s central bank, the Bundesbank, improved its own estimate for the German economy for 2015 and beyond thanks to the nation’s continuing record low unemployment and a stronger Euro.

The German central bank now predicts gross domestic product (GDP) to expand by 1.7 percent by the end of 2015, and 1.8 percent by the end of 2016. In December, the Bundesbank had predicted growth of just 1 percent for 2015 and 1.6 percent for 2016.

Germany has Europe’s largest economy, so it was better able to weather the fallout of the Global Recession than many of its neighbors. This resilience is now being boosted by a rising rate of job creation both in Germany and around the whole of the Eurozone, as well as an overall strengthening of the economies of Germany’s closest neighbors and trading partners. Stimulus provided by the European Central Bank can be credited with much of the improvement Europe has seen thus far, but lower oil prices have played a significant role in 2015, as well.

According to a report by Bloomberg, inflation may be the only downside of this juggernaut German economy. The pickup in consumption will probably fuel an increase in consumer prices. This led the Bundesbank to revise its inflation figures to 0.5 percent for 2015, 1.8 percent in 2016, and 2.2 percent by 2017.

Part of the reason for the revised GDP estimates stems from upticks in the industrial sector. Factory orders, a signal of future output, rose by 1.4 percent in April, according to the German Economy Ministry. Similarly, export orders jumped up by 6.8 percent for European buyers and 4.7 percent from the rest of the world. Of those orders, consumer goods rose by 4.5 percent and investment goods increased by 2.3 percent.

All of this additional output has led to further employment. German unemployment fell for the eighth month in a row in May, with unemployment at just 6.4 percent. That represents the lowest rate of unemployment Germany has experienced as a nation since the country reunified in 1990. At present, German companies need to fill as many as 250,000 open positions, 95,000 of which are in health care alone, according to the German Chamber of Commerce and Industry.