At +1.5%, the economy last year recorded its weakest GDP growth since 2013. Domestic demand was the main growth driver in 2018. Private consumption grew by a moderate +1% in real terms. Investment in machinery & equipment and construction meanwhile showed robust growth of +4.5% and +3%, respectively. The negative contribution from the external sector (-0.2pp) is evidence for the negative impact that the smoldering trade dispute with the U.S. as well as the economic slowdown in China and other important emerging markets have had on German exports. After a strong start to the year, the German economy initially stumbled in the second half of 2018. But even though the growth peak in the current economic cycle is most likely behind us, rising concerns about a looming economic slump have probably turned out to be exaggerated. There are some indications that a timid economic recovery has already been underway in late 2018, as we had anticipated. We expect this recovery to continue and, for the time being, we stick to our annual GDP growth forecast of +1.7% for 2019.
