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 (31)
BMI View: We continue to retain our generally positive and optimistic outlook for the German agricultural sector in our Q2 2016 report update. We have made some minor revisions in our Q2 2016 update, but our core view remains unchanged. We believe the German agricultural system benefits from high levels of competitiveness, strong infrastructure and a very good farming 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 in the years to come.
Corn consumption will grow by a healthy 3.5% in 2015/16 to reach 1.069mn tonnes.
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 are anticipating a degree of calm to enter the German consumer electronics market over the course of our forecast period to 2020 as a result of currency stabilisation. The maturity of the market, with high levels of household penetration and multiple device penetration in most key markets, means volume growth will be subdued even as confidence returns. We are, however, considerably more bullish regarding premium device sales in Germany over the medium term, a view supported by our analysis of household income trends and patterns of vendor innovation. Downside risks to this core scenario include the potential for a hard landing in China or a deterioration of the security situation in Europe.
Latest Updates And Industry Developments
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: The German food and drink market has been growing steadily over the past five years. A relatively favourable top-down macroeconomic outlook as the wider economy moves towards being more domestic demand-oriented should provide the food and drink industry with some good momentum to work with from the perspective of manufacturers targeting the market.
|Food & Drink Spending|
|e/f = BMI estimate/forecast. Source: BMI, national...|
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: Germany's IT market is lucrative due to an affluent consumer base and strong demand from a diversified enterprise base, and we envisage significant opportunities for vendors at the premium end of the market. Enterprise adoption of complex, high-value solutions is expected to increase over the medium term as modernisation is promoted through the 'Industrie 4.0' initiative. The deepening of the enterprise applications and infrastructure markets through cloud computing services is another area where vendors can capitalise on robust demand growth. The overall growth outlook is however subdued due to a weak economic outlook and the saturation of core device and application markets in Germany. We forecast a CAGR of 2.6% for IT spending to a total of EUR58.3bn in 2019, with the hardware segment expected to exhibit the weakest growth...
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: Germany has one of the largest insurance markets in the world, with strong rates of penetration and density in the life and non-life sectors. As a mature market, future growth prospects are relatively subdued, with premiums expected to broadly track wider GDP growth throughout our forecast period. The country is home to several major multinational insurers which dominate the market, many of which are pursuing overseas expansion opportunities in light of the limited growth expected in the domestic market. There is also scope for future consolidation amongst the smaller firms as the market is fragmented with a large number of firms claiming a small share of premiums.
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: We have increased our 2016 tin price forecast to USD16,500/tonne owing to a stabilisation in the Chinese economy over Q116 that has boosted all industrial metal prices significantly over January-April. While we expect consolidation over the remainder of 2016, tin prices will continue to recover beyond 2016 as the global market posts sustained market deficits and inventories dwindle.
BMI view: We have revised our aluminium price forecast from USD1,575/tonne to USD1,600/tonne in 2016, as the tightening market provided an earlier than expected floor in Q116. Aluminium prices will gradually edge higher as the global market moves into a deficit by 2018.
BMI View: Despite the strong H116 iron ore price rally, prices will edge lower due to weakening Chinese consumption over the latter half of 2016. From 2017 onwards, iron ore prices will remain subdued as iron ore prices remain under pressure from an over-supplied seaborne market, driven by strong production growth in Australia and Brazil, and weak consumption growth in China.
BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.
BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.
BMI View: We have raised our gold price forecast for 2016 to USD1,275/oz and have a new five-year price target of USD1,400/oz. We have turned more positive towards prices due to rising inflation pressures and our view that real rates will remain depressed in developed markets beyond 2016. A modest rise in prices will be insufficient to reverse the trend of weak mine investment and industry consolidation.
BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.
BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.
BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.
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: 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.
Germany's petrochemicals industry is seeing a modest but strengthening market recovery amid a cyclical economic upturn. Much of the growth has been generated by low oil prices and the positive effects of the slide in the value of the euro against the US dollar. However, if the sector is to remain competitive, it will need to invest in research and development in high-value products.
The market trend suggests that a weaker euro, coupled with slower growth in the eurozone, is having an impact on the structure of the external market. In Germany, the value of chemicals sales declined by 1.5% to EUR74.6bn due to a 2.5% fall in producer prices, in spite of a slight increase in production volume. While sales in Western Europe (EU15) fell by 1.5%, the depreciation of the euro against the US dollar boosted exports to North American Free Trade Agreement (NAFTA) countries by 13%.
As a result of falling competitiveness,...
Pharmaceuticals & Healthcare
Germany Pharmaceuticals & Healthcare
BMI View: Germany's macroeconomic environment will continue to be favourable for drugmakers and healthcare operators through 2016. Buoyant private consumption and higher public expenditure, brought about by migrant/refugee accommodation and social security payments, will appeal to multinational drugmakers. Furthermore, in order to mitigate Germany's dire demographics and growing social security spending brought about by an ageing population, there has been a broader trend in the introduction of novel and costly therapies in Germany, lead...
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 a robust forecast for the German renewables sector this quarter, in large part due to a continued strong outlook for the country's wind power sector - as project developers will aim to lock in subsidies prior to the introduction of competitive auctions in 2017. The introduction of reverse capacity auctions will stabilise capacity additions post-2018 at a lower rate than observed over the last decade, as the government will curb rising subsidy costs and prevent unsustainable growth in the renewables sector. Given the mature state of the market and high...
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: Germany is home to one of the largest tourism markets in Europe, competing with France, Spain, Italy, Turkey and the UK. While most visitors come from neighbouring or nearby European states, Germany also welcomes large volumes of visitors from major source markets further afield, such as China and the United States, which helps to somewhat lessen the market's vulnerability to regional declines. We expect to see slow but steady growth in arrivals to Germany over the forecast period between 2016 and 2020, reflecting the maturity of this well-established market as well as efforts to attract visitors from major emerging markets. We also expect to see continued investment in the already robust hotel sector as developers turn their attention to second-tier cities across the country to take advantage of growth potential...
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...