Germany

Germany is a car-loving country. With a density of 578 cars per 1,000 inhabitants, more than one in two people in Germany owns a car (including children and the very elderly). The number of cars has risen steadily in recent years and shows that - despite the climate debate, congested inner cities and the supposedly car-critical Generation Z - there seems to be no car fatigue in Germany. [more]

Germany’s growth is under pressure from renewed cyclical and structural headwinds. In this edition of Focus Germany we introduce our new Nowcast Model for German GDP, predicting that the German economy should have expanded in Q2, but that risks for activity in H2 are increasing. We take the summer break in Berlin as an opportunity for a midterm review of the traffic-light coalition’s work. In a historic flashback we revisit the challenges Germany was facing when the Economist called it the sick man of the euro and which policy measures transformed the country into an Economic superstar a decade later. We find interesting parallels to today’s situation. [more]

In this report, we analyze the recent developments in the market share of electric cars in important car markets (Europe, USA, China) and the role of German manufacturers or group brands in this market segment. The market share of German OEMs in the field of e-mobility varies in the major automotive markets. In Europe, their market share for electric cars is currently slightly below that for all new passenger car registrations. In the US, German manufacturers have a larger share of the electric car market than in the overall market. In China, however, German manufacturers are noticeably behind domestic suppliers and Tesla. In all markets, we expect competition in the field of e-mobility to continue to increase. [more]

In the second edition of our Energy Transition Monitor we disentangle the drivers of lower economy-wide energy consumption into cyclical (winter-recession) and structural (loss of production capacities, energy-efficiency measures) factors. Moreover, we take a look at the shift in primary energy sources – from gas towards renewables and coal and why we are (finally) seeing a higher speed of solar PV build-out. We also provide an update of our gas supply-demand model for the upcoming winter. Finally, we summarize current policy action aimed at boosting domestic energy capacity (solar and wind) and improve the overall economy’s energy efficiency, both at the EU and national level. Our earlier thematic analysis on German gas supply and Germany's energy transition includes: "Energy Transition Monitor #1 - what, when and how", "Costs of electricity generation: system costs matter" and "EU Green Deal Industrial Plan - status update and how to fund it". [more]

The current development of the Rhine's water levels brings back memories of the previous year, when there were massive problems for Rhine navigation during summer. Since June, the level has fallen by a similar rate as last year or in 2018, which also saw a draught. Should the water levels approach or reach the lows of 2018 or 2022, this could impair the recovery of the German economy, which we already expect to be very modest. [more]

Electric heat pumps are becoming increasingly popular with German homebuilders. In 2022, they already supplied the primary heating energy in more than half of all homes in new buildings. In the 1st quarter of 2023, this share even rose to 55%. Thus, heat pumps have taken over the market leadership in a short time. An important reason for the rapid growth of their market share is government subsidies, which can account for up to 40% of the total cost. [more]

Corporate lending is slowing substantially but this is primarily a normalization and due to subdued demand at least as much as it is due to supply conditions, i.e. banks’ tighter credit standards. At +8% yoy, credit expansion is still substantial. Only two industries are currently seeing a contraction. More worrying is the drying up of the corporate bond market where net issuance has collapsed since autumn. It is suffering from the double whammy of much higher interest rates and the disappearance of its dominant buyer of recent years, the ECB. [more]

With Q1 GDP growth revised to -0.3% we now expect annual GDP to shrink by 0.3% in 2023. With the expected US recession weighing on German economic momentum towards year end we have cut our annual forecast for GDP growth in 2024 to 0.5% from 1.0%. Meanwhile, the energy transition policy is putting strains on government cohesion, as can be seen from the failure to agree on a piece of climate legislation this week. Spending pressures and debt-brake limits add to tensions. Still, none of the three ruling parties has an incentive to trigger early elections. [more]

The costs of electricity generation of different energy sources are often debated. Often, however, no distinction is made as to which specific costs are meant. While renewable energies have marginal costs close to zero and very competitive levelized costs of electricity, a high and increasing share of weather-dependent renewables leads to system costs. They result, for example, from the provision of back-up power plants and the falling average capacity utilization of all existing power plants. We discuss the different types of costs of power generation and note that investments in renewables are easier to realize than the construction of new back-up power plants. [more]

The new edition of our Germany: Economic Chartbook provides an overview of key data on current economic developments. The winter dip in the German economy has not been as severe as feared. Nevertheless, the picture at the current margin is rather divergent. While headline inflation is likely to subside further, core inflation might prove sticky. Private household demand is still under pressure, despite strong inflation-related one-off payments. Corporate lending slows after a long boom. Overall, we expect only a shallow recovery for the rest of the year, so German GDP is likely to stagnate on average in 2023. Last but not least, we also update you on our recent thematic research on the German housing market, progress with the energy transition and the German position on the recent EU fiscal rules proposal. [more]