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
German economic growth will remain solid over the coming years, as the economy rebalances away from exports and to domestic demand.
A rise in domestic consumption will reduce Germany's large national savings ratio, which is one of the eurozone's largest structural imbalances.
Germany will run small budget deficits in the years ahead, but its overall credit risk position will remain very favourable compared to most large eurozone economies.
Chancellor Angela Merkel will struggle to retain popular support in the coming months, but will still win the next federal election in 2017 if she decides to run.
We believe the government could come under increased pressure if there are any...
Germany Industry Coverage (22)
BMI View: The German agricultural system benefits from high levels of competitiveness, strong infrastructure and a very good farming industry knowhow. Grains, dairy and sugar will all stand to benefit this year and beyond. In the livestock sector, pork producers will be under pressure due to strained relations with Russia. Sugar and milk production will expand due to the removal of quotas. Over the short-term, the unexpected decline in milk prices due to the removal of the quota and lower demand from export markets is hurting smaller dairy farmers, a situation that Berlin has vowed to address promptly by offering subsidies and considering a temporary dairy production quota to help stabilis...
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 Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Germany Consumer Electronics
BMI View: We forecast a second successive year of decline in German consumer electronics spending in 2016, but still a significant improvement over market conditions in 2015. US dollar appreciation hit consumer electronics spending through higher local currency prices in Germany in 2015, which exacerbated negative technology trends, but both the euro-USD exchange rate and technology trends are less hostile in 2016 and will contribute to improved performance even with the downside introduced as a result of Brexit. The medium-term outlook is buoyed by our forecast for euro appreciation from 2017, but volume growth potential is limited due to the maturity of the German market where vendors will be reliant on replacement spending....
Defence & Security
Germany Defence & Security
BMI View: Germany will increase defence spending over the coming years, in order to move ahead with Bundeswehr reform and expansion plans, amid regional tensions over the Ukraine conflict and migrant crisis, growing threats from terrorism, and in response to NATO military requirements. The government's planned budget increase will be facilitated by steady economic growth, and a healthy fiscal position. In the short- to medium-term, the MoD will focus on strengthening the army's capabilities - substantially growing its stock of land systems. The country's highly developed domestic defence industry will capture the majority of new contracts, although we do note that German authorities are working to strengthen Europe-wide collaboration on defence programmes, and will seek to support cross-border projects through investment and procurement over our...
Food & Drink
Germany Food & Drink
BMI View: Germany's economic reorientation towards greater domestic consumption bodes well for the food and drink industry, which we forecast to sustain moderate growth rates over the next five years. Food and drink sales will continue to be shaped by increasing consumer demand for convenience and rising health consciousness.
|Food And Drink Spending|
|f = BMI forecast. Source: BMI, national statistics|
Key Trends & Industry Developments...
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: Brexit increased the degree of uncertainty surrounding the Eurozone economic outlook, but under our core scenario the direct impact on Germany's IT market should be relatively limited. We expect technology trends will continue to determine market dynamics, for instance mature PC market means the hardware outlook is subdued, while the next wave of enterprise demand for software and services surrounding the Internet of Things and cloud computing through the 'Industrie 4.0' initiative offers much brighter prospects. We forecast German IT spending will increase at a CAGR of 2.8% over 2016-2020 to a total of EUR60.4bn in 2020.
Latest Updates And Industry Developments
BMI View: Germany's solid economic performance continues to present upside risks to our construction industry forecasts over 2016 and 2017, although we note a lack of investment from the government and corporations means growth will trend lower over our 10-year forecast period. The rail infrastructure and renewables projects remain the market's bright spots.
Latest Updates And Structural Trends
This quarter we maintained our forecast that Germany's construction sector will register healthy real growth rates of 1.8% and 1.4% in 2016 and 2017 respectively. Our longer-term outlook also remains stable, with the industry's annual growth rates averaging 1.3% between 2016 and 2025.
Germany's net transport infrastructure industry's value has been contracting for...
BMI View: We have a moderately positive long-term outlook for Germany's insurance sector, with low single-digit growth rates expected across both major segments. The market's mature nature means that premium growth will largely track GDP growth over the next five years. Ordinarily, a market this mature would provide few opportunities for new entrants; however, Germany's market has a very large number of players and is highly competitive, indicating that there is scope for consolidation via merger and acquisition activity. .
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 coal sector is one of the largest in Europe and is the main driver of mining activity in the country.
Oil & Gas
Germany Oil & Gas
BMI View: Domestic oil and gas production will continue to decline as weak oil prices hold back investment. Softer margins in H216 will see the refining sector struggle to improve on a strong 2015. Fuels consumption in Europe's largest market remains flat and will trend down.
BMI View: Germany's petrochemicals industry has witnessed a decline in the value of sales, but rising output volumes and continued low naphtha costs have helped producers defend margins. The outlook is modestly positive with sales likely to be increasingly oriented towards the domestic market, although there are ongoing concerns over the potential threat of competition from low-cost producers the US and the Middle East. Germany will need to maintain its level of value added with its advantage in technological innovation in order to maintain competitiveness.
In Q116, German chemical output, excluding pharma, rose 1.9% q-o-q but only 0.2% y-o-y, according to the Verband der Chemischen Industrie (VCI, Chemical Industry Association). However, with capacity utilisation at 83.6%, the sector was performing well. Chemical...
Pharmaceuticals & Healthcare
Germany Pharmaceuticals & Healthcare
BMI View: Germany's pharmaceutical and healthcare markets will continue to expand over the next ten years, translating into renewed commercial opportunities for drugmakers operating in the country. While patented medicines will continue to account for the largest share of the pharmaceutical market, generic medicines will outpace the overall market growth rate, gaining market share. In fact, we expect to see government cost control measures and market structure to support the gradual commoditisation of the generic drug market, which will put downward pressure on prices, despite growing volumes.
Headline Expenditure Projections
BMI View: The Energiewende will sustain downward pressure on margins in the conventional power generation segment and will continue to pose and existential threat to utilities like E.ON and RWE. The government is currently undertaking sweeping reform of the electricity market in order to ensure security of supply as intermittent renewable energy plays a bigger role in the power mix, but - at this stage - there is little to indicate that the redesigned market will support an uptick in thermal generation, with the government eschewing the introduction of fully-fledged capacity market...
Germany Real Estate
BMI View: Germany has one of the most developed and investor-friendly commercial real estate markets in the EU, with a strong consumer environment supporting retail and industrial sectors through continued household spending. It is expected that demand for all sectors will remain good in 2016, with low levels of new supply resulting in falling vacancy rates.
The commercial real estate market in Germany benefits from a number of the country's strengths. Berlin has a strong tourist economy, which supports the city's retail sector, while trade flows are improving. Frankfurt is a global financial centre with high rents and demand, particularly for premium property. The city hosts the European...
BMI View: We maintain our upbeat outlook for the German non-hydropower renewables sector this quarter - with wind power driving growth amid a solar sector slowdown. The introduction of a competitive auctions system by 2017 will stabilise growth at a slower, albeit more sustainable rate over the next decade, in light of rapid growth over the last decade. This will be the result of a government aim to make the segment more competitive in order to curb subsidy support growth and curtail further electricity retail price hikes.
BMI View: We hold a broadly positive outlook for Germany's large and well-developed retail market. Rising wages, improving employment rates and lower energy prices will all provide a boost to household income levels over the course of the forecast period between 2016 and 2020, and will create scope for higher spending on a range of retail sectors. An open operating environment and strong consumer demand means we expect to see more overseas retailers entering the market, despite the highly competitive nature of sectors such as retail and homeware. Over the longer term, we do note that a shrinking population will have an effect on the potential...
BMI View : We have positively revised our outlook for the German mobile market in Q1 2016. The German mobile market remained positive in the first three quarters of 2015 without posting negative subscriber losses. We believe that the market will be split into three main operators after O2 purchased E-Plus to become the dominant provider. 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...
BMI View: The German tourism industry is well established and plays an important role in the domestic economy where it accounts for a substantial share of domestic and foreign investment and a significant share of the job market. The government is highly supportive of the tourism market and continues to invest in wide-ranging marketing campaigns to promote the country's broad range of attractions, both within established markets in Europe and growing Asia Pacific and Latin America markets. As a mature market, we expect arrivals to grow relatively slowly over the forecast period through to 2020, though this will be sufficient to boost tourism related expenditure and hotel and restaurant industry value. We do note, however, that some potential risk to regional tourism stems from heightened security concerns and a potential economic slowdown in the eurozone.
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...