German growth to reach 0.4% qoq in Q3, with downside risks

In Q3, German GDP is expected to have grown by 0.4% qoq, the same as in Q2, pointing to resilience to the Greek confidence shock and global growth concerns due to China. Late data in Q3 have however been weaker than expected, suggesting some downside risk to the forecast. 

Looking ahead, forward-looking indicators still suggest surprising confidence in future growth despite having weakened slightly in recent months. This could be linked to the robust labour market, rising wage growth with still low inflation, and increased demand arising from the migrant inflows since the summer. 

While the political fallout from the refugee crisis may still be significant, the short term effects on increased consumption and fiscal spending should boost the economy. This is particularly welcome in terms of the timing, with global growth concerns and the VW scandal pressing confidence. 

"While downside risks still dominate, we expect continued resilience in German domestic demand which should support above-potential growth also in Q4 and in 2016", notes Societe Generale.