In the Bundesbank’s June Monthly Report published today, it noted “all in all, the projection paints a picture of an ongoing economic boom, in which increasing supply-side bottlenecks are reflected in strong wage growth and in higher domestic inflation.” It projected German GDP growth to slow to 2.0% in 2018, 1.9% in 2019 and then 1.6% in 2020. HICP inflation is projected to be rather steady, at 1.8% in 2018, 1.7% in 2019 and 1.8% in 2018.
But Bundesbank also warned that “risks outweigh opportunities”. President Jens Weidmann noted that “uncertainties regarding the prospects for the German economy are considerably greater than they were.” And, downside risks relating to the external environment outweigh the effects resulting from the probably more expansionary fiscal policy in Germany.
In particular, exports and commercial investment are likely to see weaker growth. employment growth is dampened by growing lack of skilled workers. And that tens to “brake” the rise in household disposable incomes.
Here is the link to the monthly report.