Germany's capital spending likely to gain momentum in 2016

Growth in Germany is broad-based but mainly driven by private consumption, that grew by 2.1% y/y in Q2. The driving forces will likely remain in place with an improving labour market, rising real income and very low interest rates. Wage growth has picked up, both in nominal and real terms. 

The internal rebalancing in the Euro area still has a long way to go, however. Inflation in Germany is likely to remain close to the Euro area's average. The current account surplus is still huge, although it's shrinking vis-à-vis the other Euro-area countries.

Neither investment in machinery and equipment nor in construction have not picked up strongly so far. Companies are still not overly optimistic when it comes to demand expectations. Worries about a break-up of the Euro area have abated, but at the same time Emerging Markets give more reason to worry.

"All, in all, the gross fixed capital spending is expected to gain some momentum in 2016, but overall, investment cycles seem seems to be pretty flat these days. That said, other countries certainly look worse in that respect than Germany", says Nordea Bank.