Last week’s news that German GDP rose by 0.7% in 2012 clearly confirmed that the economy broke no records. But it did well to continue growing at all in such a weak economic and political climate. What’s more, growth last year was driven not only by exports but consumer spending too. Given the relative health of the labour market and (hopefully) a continued absence of fiscal austerity, consumer spending should continue to expand modestly in the year ahead. But the outlook for global demand and the strength of the euro both bode ill for exports. While Germany should stay well ahead of the rest of the euro-zone in 2013, we still expect an economic contraction of about 0.5%, which would be much weaker than the consensus forecast.
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