Before the global financial and economic crisis erupted central bankers were considered if not the masters of the universe at least the masters of the world of finance. However, serious problems have emerged with regard to both the theoretical underpinnings of monetary policy as well as to its implementation. As the roles of the financial sector and asset bubbles had been neglected, the problems contributed to the development of the global financial crisis.
Even though our forecast for German GDP growth in 2013 has hugged the lower end of the consensus range for quite a while, we have slightly reduced our estimate to 0.1% (from 0.3%). The main reasons for doing so are the below-forecast Q1 GDP reading (0.1% qoq) and the downward revision for 2012, which additionally depressed the starting level for 2013. Despite the downward revision to German GDP we now expect private consumption to pick up by 1%. The driving factors are the high employment level, falling inflation and relatively robust wage settlements. [more]