Germany lowers 2015 growth outlook

Record-high employment, rising wages and almost stable prices are boosting household spending while cheaper gasoline is freeing up a few cash for other purchases. The federal government and states are spending 10 billion euros ($11 billion) on accommodating the new arrivals, integrating them and finding them jobs.

The economy is forecast to expand 1.8% in 2016, unchanged from previous projection.

He said money being put into education to help cope with the refugee influx could work “a bit like a stimulus program” starting next year.

The ZEW Centre for Economic Research said its index of German economic sentiment fell to 1.9 this month from 12.1 in September, well below economist’s forecasts for a reading of 6.0. “The emissions scandal at Volkswagen and sluggish growth in emerging markets are dampening the economic outlook for Germany”, commented ZEW President Clemens Fuest in a recently released statement.

Exports fell by a smaller than forecast 3.7% from a year earlier, resulting in a trade surplus of $60.34 billion.

Gabriel said the German economy was expected to power ahead as strong domestic consumption outweighs “gloomier global growth outlook due to slowing growth in China and in raw materials-rich emerging countries”.

The ministry expects domestic demand to rise by 1.7% this year and 2.1% next year, compared with April’s forecasts for gains of 2% and 1.8% respectively.

Gabriel said he was not concerned about Germany slipping into deflation despite annual inflation turning negative in September for the first time in eight months.