Overall Economic Conditions

ECONOMIC DEVELOPMENT

The global economy continued to lose momentum in 2016 and was particularly slow-moving in the first half of the year. Despite a renewed pick-up in the third quarter, the upswing noted in the second half of the year was not enough to generate stronger global gross domestic product (GDP) growth. Thus, in January 2017 the International Monetary Fund (IMF) estimated that the world’s GDP expanded by 3.1 percent in 2016 compared to the slightly higher 3.2 percent recorded for 2015.

Growth within the euro area also grew at a slower pace than in the previous year as GDP rose by 1.7 percent following 2.0 percent in 2015. Economic growth was primarily held back by political uncertainties stemming from gains made by populist movements such as the one in Great Britain where a referendum on the UK’s continued membership in the European Union (EU) led to a majority voting for Britain to exit (Brexit) the EU.

Based on initial estimates prepared by the Federal Statistical Office, Germany’s economy grew by 1.9 percent, or more than expected and at fastest pace seen in the last five years. The good economic results were mainly driven by a 2.5 percent increase in consumer spending. Furthermore, economic growth was strongly supported by rising capital expenditures, especially a 3.1 percent increase in investments in construction projects. Growth in this sector was again driven by investments in new residential housing, which climbed by 4.3 percent. Investments in construction within the public sector grew by 2.4 percent while investments in construction of commercial property expanded by 0.9 percent.

The annual average rate of inflation remained low at 0.5 percent. Prices for consumer goods did, however, rise notably towards the end of the year as the Federal Statistical Office recorded a 1.7 percent jump in December. This increase was primarily due to a notable increase in energy prices.

The labour market continued to develop favourably in 2016 as the annual average number of employed persons during the year increased by more than 400,000 to 43.5 million. The average number of unemployed persons receded further as 2.7 million jobseekers were registered, or about 100,000 less than in the previous year. The unemployment rate decreased by 0.3 percentage points to 6.1 percent.