German GDP growth to slow slightly in 2017, says Deutsche Bank

Deutsche Bank expects German GDP growth will see some slowdown in 2017 following considerable momentum over the last two years. However, Deutsche Bank believes that  the underlying robust domestic economic growth path remains intact. Weak global trade and political uncertainty will dampen exports and investments.

"We note the growth rate will almost half, to 1.1%, in 2017, but around half of this is due to a smaller number of working days. While the economy will likely have to do without a number of special factors that provided a boost to domestic demand in 2016, we believe that the underlying robust domestic economic growth path remains intact." said Deutsche Bank in a report.

German labour market is expected to remain healthy. Rising energy prices could push inflation from 0.5 to 1.5 pct which could cause real income growth to slow slightly. Private consumption, however, will remain the main driver of growth, expanding by a good 1 percent.

Government spending increased by around 4 percent in 2016 driven by the refugee crisis, this rate could be halved as the influx of refugees slows. The construction industry is expected to report solid growth of 2 percent, still low given the considerable order backlog and favourable financing environment. Limited supply of labour and regulatory hurdles likely to keep construction activity dampened.

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