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Overview

Confidence steady despite uncertainty

Confidence in Germany’s economic outlook has climbed for the second year in a row and is now one of the highest globally. In fact, 78 percent of Germans say that things are going “fairly well or very well” financially for their country, compared to a global average of just 43 percent.

Confidence in the country’s financial standing is now at a five-year high. And when asked about their own personal financial situation, 54 percent also say things are going well, up two percentage points from a year ago, and again above the global average (50 percent).

These perceptions broadly reflect the reality of Germany’s economic situation. While trade conflict between the US and the European Union has created a degree of uncertainty, unemployment has been well under 5 percent for several years and shows no sign of rising.

 

GDP growth has been ticking along at 2.2 percent a year for the past two years, and is forecast to be 1.9 percent for both 2018 and 2019 – fairly strong by Western European standards.

The European Commission reports that escalating protectionism in key world markets – most notably the US – would be likely to dampen demand for German exports, but for now business investment is still growing, construction activity is strong, and willingness to hire is high.

The continued strength in the labor market is leading to wage growth, and that is likely to boost private consumption – good news for brands. Wage increases in many sectors were expected to bring about a 1.5 percent rise in consumer spending in 2018, despite an increase in the rate of inflation.

Such stability runs counter to the ups and downs of recent German politics. Since the federal election of 2017 returned Angela Merkel as chancellor for a fourth consecutive term, her Christian Democratic Union party, and its coalition partners, have been dealt serious blows in regional elections.

Ms Merkel said the results showed that even when the economy was thriving, and employment was high, voters wanted more. She said there had been an erosion of trust and confidence in politics. Her takeaway after a poor showing in elections in the prosperous southern state of Bavaria was that she “must better ensure that this trust is there and also make the results of our work visible”.

Kantar research shows that Germans are significantly less concerned about their financial security and corruption than the global average. What worries them more is data security, having someone to care for them in old age, and the fear of being caught up in a terrorist attack.

They are also concerned about the changing nature of German life. There are now more people with foreign citizenship living in Germany than ever before – around one in eight people – following a recent influx of asylum seekers and migrants from other EU countries.

Kantar research shows 63 percent of people are wary about how this is changing the established values and way of life in Germany – a rise of two percentage points in the past year.