Market Report 2011 GerMany - Europe Real Estate

Macroeconomic conditions in Germany
Economic growth: upturn remains intact
During the past year, Germany recorded the highest economic growth since reunification.
There were several reasons for the increase in economic output of 3.6%. The
rapid and powerful recovery of the global economy led to a significant increase in
exports. In addition, inventory investments made a significant contribution to growth.
Since last year’s feared collapse in the labour market did not occur, even private consumption
increased slightly.
However, the growth momentum in Germany weakened in the fourth quarter of 2010.
This was due primarily to the unusually cold weather conditions which affected the
construction sector in particular. Aside from this, the upturn remains stable – the Ifo
business climate is at a level similar to the high recorded during the reunification
phase. The Purchasing Managers’ Index (PMI) and incoming order levels indicate that
the German economy has picked up speed again during the first quarter of 2011.
Most recent economic forecasts point to high economic growth of roughly 2.8%
in Germany for the current year. A slowing global economy could see this figure
drop to around 2% next year (due to the dampening effect of rising prices for raw
materials and the consolidation of public budgets). In this context, domestic demand
due to capital spending and private consumption is likely to play an increasingly
important role.
It is important to emphasise once again that the economy remains exposed to significant
downside risks – it is not yet possible to estimate the consequences of the
catastrophe in Japan for the global and the German economy given the uncertainty
regarding developments at the Fukushima nuclear power plant. Political upheaval in
the Middle East and not least the Libyan conflict could have serious consequences
for the economic environment. And finally, there are persistent concerns regarding the
unresolved sovereign debt crisis in the Eurozone, the UK and in the US.
Labour market: expansion in the office-related sectors
of the economy
The economic upturn has also had a noticeable impact on the labour market over the
last few months – the number of people in gainful employment in February was 40.29
million, which is an increase of 494,000 over the previous year. Seasonally adjusted,
employment reached its highest level since reunification, totalling 40.717 million people.
The growth in service sector employment was particularly strong: In the fourth
quarter of 2010, a total of 388,000 new jobs were created in this sector representing
a year-on-year increase of 1.3%.
The vast majority, or 226,000, of these new jobs were created in the office-related
sectors of finance, letting and corporate services. However, even the manufacturing
industries successfully halted the job cuts of the previous year. Against this background,
the unemployment rate fell within a year from 8.5% to 7.6% in March 2011.
in %
GDP growth
4
3
2
1
0
-1
-2
-3
-4
-5
'0 0 '02 '0 4 '06 '0 8 '10 '1 2e
Source: Federal Statistics Office, forecast by IVG Research
Index 2000 = 100
Ifo business climate Germany
120
110
100
90
80
70
'0 0 '02 '0 4 '06 '0 8 '10
Climate Location evaluation Expectation
Source: Ifo economic survey
in %
Employment
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
'0 0 '02 '0 4 '06 '0 8 '10 '1 2e
Source: IMF, forecast by IVG Research
5