GERMANY

摘要

A1.2% (q-o-q) surge in private consumption lifted the Q1 GDP advance to 0.4% (q-o-q), emphasising a rather buoyant domestic backdrop which is the dominant driver of growth. The Q1 spending spree was the largest in almost eight years, supported by robust employment and wage growth. A sizeable drag in inventories was also noteworthy, suggesting that an earlier build-up in the second half of 2018 - mainly caused by bottlenecks in the auto sector - has largely been eroded. However, the current GDP consensus forecast of 0.8% implies that activity will soften laterthisyear, albeit alittle less sharply than the Bundesbank expects. The bank now predicts growth of just 0.6%, revised down from 1.6% six months ago. A -1.9% slide in industrial output in April intensified the gloom, fuelled by a manufacturing slump of -2.5% (m-o-m), in further signs that the global trade conflict is hurting demand, especially in key markets such as China. Factory orders have underlined this fragility, trending far lower compared with a year earlier. Moreover, the manufacturing PMI figure was still languishing deep in contractionary territory in May. Germany's Ifo business climate index fell again in the same month, as respondents turned more downcast on the current outlook. Construction has been the only bright spot, yet a perceived escalation in global risk sentiment, which has dragged German 10-year bond yields into negative territory, leaves industry exposed to demand shocks over the medium-term.