The German market is the largest in Europe, attracting many of our clients. Germany has an export-driven economy, which places an even emphasis on services and production. The country offers a stable environment for investors, as well as access to the EU's domestic market. It is also world-renowned for its manufacturing in automotives, mechanical and electrical engineering, and chemicals. Our coverage – using our unique Total Analysis model – ensures that our clients make sound, risk-assessed decisions in Germany. We keep them informed of the latest market moves and political developments, supported by our interactive data and forecasting. They also benefit from in-depth analysis of 21 of Germany's most important industries, as part of our 'top-down' and 'bottom-up' perspective. It is our job to make it easier for you, as our client, to reap rewards in Germany.
Germany Country Risk
With the household consumption outlook looking increasingly positive, the long-awaited rebalancing of the German economy away from net exports and toward domestic demand is underway.
Though it is becoming more balanced, Germany's economy will continue to be characterised by very high net savings rates for both the private and public sectors, which will continue to hinder the eurozone's growth trajectory.
While we believe Germany's current account surplus will peak in 2015 on the back of lower oil prices, the narrowing of the surplus over the next five years will be limited by tight fiscal policy.
We expect German foreign policy to become increasingly isolationist over the next few years, driven by the declining global influence of the US, changing attitudes of a younger...
Germany Industry Coverage (23)
BMI View: While planting of the winter wheat crop went well and is reportedly in good condition, the substantial gain in output in 2014/15 informs our forecast for wheat production growth to decline in the 2015/16 season. German pork producers will remain under pressure, owing to the ban on meat imports from Western countries that has been imposed by Russian authorities. On the other hand, sugar production could expand at a reasonable pace over the coming years, owing to an increase in growing areas and yields, as well as the potential end to the EU's sugar production quota in 2017.
Milk production growth from 2013/14 to 2018/19: 21.0% to 37.1mn tonnes. Modest growth will be supported by export demand and higher prices, and held back by sluggish...
BMI View: Growth in the passenger car segment will remain robust as strong real wage growth and Germany's economic rebalancing towards more private consumption both provide support to car demand.
|* Industry recovery to remain in fragile stage in 2016 with widespread discounts and dealer self-registrations bolstering sales numbers.|
|* Fall-out from Volkswagen (VW) scandal to remain focused on VW brands only and unlikely to cause serious downturn in overall car demand.|
|* Commercial vehicle sales to lag passenger car demand as weak investment in heavy industries remains weak....|
Germany Consumer Electronics
BMI View: We expect a sharp contraction in consumer electronics spending in US dollar terms as a result of euro depreciation in 2015, but the forecast is for local currency growth of 3% in 2015. Even in local currency terms it is only the handset segment we forecast will continue to grow in 2015 as tablet market contraction, TV set price erosion and digital camera cannibalisation all weigh on the outlook even without depreciation. These drags on growth are however exacerbated by uncertainty surrounding Greece's position in the eurozone, as well as the heightened risk of a hard landing in China. Our core medium-term scenario is for an easing of downside risk,...
Defence & Security
Germany Defence & Security
BMI View: Germany possesses one of Europe's largest defence sectors. The country is a major exporter of materiel around the world. Germany enjoys a reputation as a reliable supplier of high-quality defence equipment and subsystems. This is particularly evident in the land and naval systems domain. Historically, the domestic demand for German armaments has been outstripped by export sales. Furthermore, since the end of the Cold War, domestic demand for materiel has contracted significantly as German politicians and defence planners have been quick to exploit the so-called 'peace dividend' by reducing the size of the armed forces.
However, following several years of defence expenditure reductions, Germany will...
Food & Drink
Germany Food & Drink
BMI View: The German food and drink market has been growing steadily during the past five years, thus demonstrating the industry's ability to withstand changing economic and consumption trends over time. On account of positive consumer outlook, we believe the German food and drink industry will maintain sustained growth rates, averaging 3.6% per annum between 2014 and 2019.
Key Forecasts (local currency)
Total food consumption growth year-on-year (y-o-y) in 2015: +4.0%; compound annual growth rate (CAGR) 2014-2019: +3.6%
Food consumption per capita growth (y-o-y) in 2015: +3.8%; CAGR 2014-2019: +3.5%
Total soft drinks sales growth (y-o-y) in 2015: +2.5%; CAGR 2014-2019: +3.0%
Germany Freight Transport
Following a year in which we saw increasing volumes across the whole of Germany's freight transport sector, BMI believes 2015 will see further growth.
Total trade is projected to pick up with our Country Risk team forecasting a y-o-y increase of 1.35% in 2015, following an estimated growth at the same rate in 2014.
Road freight is set to continue to dominate the sector and is projected to grow by 2% in 2015. The sector was unable to defy the downturn losing more than 11% of freight volumes over 2009 and 2010 before a strong recovery begun in 2011.
Port of Hamburg tonnage is also expected to grow, having completed, according to our estimates, a full recovery to its pre-downturn levels in 2014.
Headline Industry Data
2015 Air freight tonnage is expected to grow by 1.5%...
Germany Information Technology
BMI View: Uncertainty surrounding Greece, as well as the heightened risk of a hard landing in China, present short-term downside for Germany's IT market and are reflected in our relatively bearish outlook for 2015. Over the medium term we expect these risks to subside, enabling the market to expand at a steady CAGR of 2.5% 2015-2019 to reach a total value of almost EUR58.2bn in 2019. As a consequence of PC market maturity and the relatively conservative profile of German consumers, we expect hardware spending to underperform against software and services where stronger growth will be driven especially by increased adoption of cloud services by the public and private sector. Additionally, Germany continues to attract inward investment from leading global IT market vendors, with the internet of things ...
BMI View: A resurgent German economy presents upside risk to our construction industry forecasts over 2016, although we note that a lack of investment from the government and corporations means that growth will trend lower over our 10-year forecast period. The residential sector, rail infrastructure and renewables projects remain the market's bright spots.
Forecast and Latest Updates:
We forecast real growth in the German construction sector of 1.8% over 2016, driven largely by the residential sector, buoyed by a strong German economy, as well as a marginal increase in government financing for infrastructure.
Low interest rates have made mortgages affordable and German real estate has been viewed as a safe haven for European...
BMI View: Germany's insurance sector is among a number of Western European markets facing significant challenges over the next few years as low interest rates and sluggish growth across the eurozone temper the ability of firms to generate profits and new business. That said, the positive financial results of German life and non-life insurers support our outlook that premiums will grow at a steady rate in euro terms over the coming quarters.
Both Germany's life and non-life insurance sectors are dynamic extremely well-developed. Indeed, in terms of written premiums, the non-life segment is the second largest in the world after the US and the largest in Europe. Among Germany's strengths are the presence of a number of world class multinationals with significant economies of scale. These include the Allianz...
Germany Medical Devices
BMI Industry View : Despite an increasingly challenging operating environment, Germany will remain one of the most attractive medical device markets in Western Europe (WE), testament to the underlying strength of the German economy and a commitment to maintain a high quality healthcare service. From January 2016, a hospital reform programme will help address the problem of chronic hospital underinvestment. In the ambulatory sector, support for innovative forms of healthcare delivery will seek to address...
BMI View:Germany's metals sector faces further challenges over the next few years as low commodities prices, stagnant consumption and high production costs weigh on operating margins. We expect output growth to remain moderate across the core metals products we monitor through to the end of our forecast period in 2019. Germany will remain a leading global consumer and producers of these metals, with demand centres on the country's automotive and manufacturing sectors.
Germany will retain its status as one of the world's leading metals producers over the forecast period, and will continue to be an important source steel, aluminium and copper production in particular. Demand will continue to centre on the country's autos manufacturing industry, while the construction and durable goods industries will also remain...
BMI View: Germany's coal sector is one of the largest in Europe and is the main driver of mining activity in the country. Coal output continues to grow courtesy of strong demand for lignite used in the majority of the nation's power plants, however, the industry finds itself increasingly under threat from the rapid development of renewable energy production as well as growing opposition to fossil fuel-based energy production across the EU. These factors are likely to see the relative value of German mining gradually decline over the long-term.
Germany's mining sector is heavily focused around coal mining, with the country currently the largest producer of lignite, or brown coal, in the EU and boasting the eight highest annual output in global terms. Located primarily in the Rhineland region in Western Germany, the lignite mining industry remains a major employer. The...
Oil & Gas
Germany Oil & Gas
BMI View: Germany will remain the biggest consumer and importer of oil and natural gas in Western Europe for the next 10 years. Demand for gasoline and diesel will fall as improving efficiencies in the transport fleet weaken consumption patterns.
BMI View : A fall in chemicals output in Q315 underlined the market volatility affecting the German petrochemicals industry, but the industry is facing up to the challenge of competitiveness through investment in research and development. However, high energy prices related to the government's environmental strategy continue to hinder growth.
Three factors will determine whether the German petrochemicals industry will retain global leadership: cost competitiveness in raw materials and energy; increasing investment in value-added production instead of low value high-volume polymers, and; the performance of external markets, particularly in the eurozone, which absorbs three-quarters of German output.
Cost pressures have been alleviated by lower naphtha feedstock prices, but there is growing concern over the impact of higher energy costs on...
Pharmaceuticals & Healthcare
Germany Pharmaceuticals & Healthcare
BMI View: As the German economy observes signs of a tentative long-term rebalancing in which private consumption will play a more significant role in economic growth, recent improvements in high frequency indicators have lead us to an upward revision of the pharmaceutical market growth forecast for 2015. However, the pharmaceutical market growth potential will continue to suffer significant downward pressure due to a challenging reimbursement and pricing environment, setting a pattern of marginal market expansion over the next few years.
Headline Expenditure Projections
Pharmaceuticals: EUR44.31bn (USD59.38bn) in 2014 to EUR44.49bn (USD48.94bn) in 2015; 0.4% in local currency terms and -17.6% in US dollar terms. Forecast revised upwards from last quarter.
BMI View: An adverse policy environment and sustained strong growth in renewables will continue to pose an existential threat to German utilities such as E.ON and RWE. The profitability of thermal capacity will continue to be squeezed by low wholesale prices, which we do not expect to bounce back, and more traditional power plant impairments and write downs are likely.
Germany's Energiewende (energy transition) poses an existential threat to the country's biggest utilities and this situation is unlikely to change dramatically - with the operating environment increasingly punitive for the likes of E.ON and RWE. Politically, there is little indication that Germany will diverge from its current renewable-focused policy trajectory (despite reforms to slow the pace and contain the cost of the Energiewende) and we anticipate that renewables capacity will continue grow at an annual average of 4.3% a year...
Germany Real Estate
BMI View: Germany boasts one of the most developed and investor-friendly commercial real estate markets in the EU, with a strong consumer environment supporting steady growth in rental rates in the post-economic downturn era. Rental rate growth in the office, retail and industrial sector is strong over 2015 in all four cities we cover, with high yields approaching 10% observed in the industrial market. A recovering national economy and strengthening GDP results in stability being offered to this European market amid eurozone confusion.
Germany's commercial real estate sector has continued its development to become one of the few locations within Europe where stability may be found. Continued growth in GDP forecast from 2016-2019...
BMI View: Germany's non-hydropower renewables market continues to grow steadily in 2015. While EEG reforms of 2014 have led to some cost reductions, it threatens to also result in lower-than-expected growth in the near future - with a tightening of the subsidies on offer and the introduction capacity caps curbing growth potential. We therefore expect the offshore wind pickup registered over H115 to tail off over the next five years. We maintain a stable growth outlook for the broader renewables sector over our forecast period, with onshore wind and solar power to remain the outperforming segments.
German's renewables expansion has been undeniably successful in terms of capacity growth in the past...
BMI View: We continue to hold a relatively positive short-term outlook for Germany's economy. Our forecasts show that the retail market will also maintain stable growth throughout 2016. Owing to low oil prices, which we expect to persist over the coming year, we are expecting greater levels of disposable incomes for consumers to use in the retail market. Household spending is expected to climb steadily throughout our forecast period and...
BMI View : Following consolidation, we believe the market will further split between the main three operators. These will look at convergence and advanced services (LTE, fibre, etc) and the remaining no-frills segment, led by MVNOs and resellers, to drive revenue growth. The strength of the latter will continue to have a negative impact on ARPU, with one of the lowest figures in Western Europe. The saturated market makes convergence and bundling core strategies to survive, and to invest into advanced services, and we would expect consolidation to occur in the fixed broadband market, as a better to compete with stronger fully convergent fixed-mobile players. This will further increase the tension between the two trends of the market, as consolidation will lead operators to focus on premium services to recover their investments.
BMI View: Germany's tourism market is well developed and, as a result of its excellent road, railway and naval connections with its neighbours, will continue to receive large amounts of tourists from all over Europe. The continued development of low-cost plane companies is also contributing to a constant increase in inbound travels. Growing business with Asia Pacific countries, especially China, will contribute to increasing interest from less traditional source markets.
Germany's tourism market is very well developed and substantially contributes to the country's economy. This is due to three main factors. Firstly, the German tourism sector is not the responsibility of one sector alone, rather a large number of federal ministries contribute to the development of the country's tourism policy and ensure the growth of the sector, including: the Ministry of labour...
BMI View: Germany's water industry is highly developed, evidenced through high drinking water and sewage network connection rates, significant investment and strict drinking water criteria. However, in order to become a water powerhouse, Germany must further improve its overall water quality. We see the improvement of water quality as the final hurdle in the advancement of the German water sector.
Over 2014, the German construction industry has indeed shown signs that it is in the best shape it has been for over a year. Yet, in spite of this positivity, we expect the water...