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
Germany's economic growth story will remain positive in 2016 and 2017, as the economy rebalances towards domestic demand.
A robust fiscal position means the country will cope with extra costs arising due to migrant inflows over the coming years.
Germany's current account surplus has peaked. It will gradually shrink due to softer export growth and accelerating imports.
Support for Chancellor Angela Merkel should stabilise in 2016. Voters who disagree with her stance on migration have likely already shifted support away from her Christian Democratic Union (CDU-CSU) party.
Major Forecast Changes
We have modestly upgraded our long-term economic growth forecasts, by around 0.2pp per year from...
Germany Industry Coverage (22)
BMI View: We have made minor upwards revisions for the German agricultural sector in our Q116 update. We hold a general positive outlook for the industry. 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 5.5% in 2016 to reach 1.11mn tonnes.
Poultry production will grow by 2.2% in 2015/16 to reach 1.6mn tonnes.
We are estimating wheat production...
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: After a sharp contraction in consumer electronics spending in US dollar terms as a result of euro depreciation in 2015, we expect the market to stabilise in 2016 and then return to growth through to 2019. We forecast total consumer electronics device spending to increase at a CAGR of 2.8% 2016-2019 to reach USD51.7bn in 2019. 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...
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: 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: 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 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: 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: Germany continues to stand as the largest pharmaceutical market in the European region, although modest growth rates due to cost containment measures will continue to weigh on drugmakers' commercial opportunities. In regional terms, the German drug market is to be outpaced by the UK market through the forecast period. However, Germany's pharmaceutical positive balance of trade will continue to expand in the years ahead, while high rate of research and development in the pharmaceutical sector will contribute in supporting innovation.
Headline Expenditure Projections
BMI View: Germany will not diverge from its renewable-focused energy policy trajectory - meaning thermal capacity will continue to be squeezed out of the market due to low wholesale electricity prices and unattractive margins. We expect more financial pain for utilities like E.ON and RWE, while uncertainty over who will shoulder the vast cost of decommissioning existing nuclear capacity will ensure the energy transition remains highly politicised.
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: While we maintain a robust forecast for the German renewables sector this quarter, the move to competitive auctions in 2017 will stabilise capacity additions at a lower rate than observed over the last decade as the government aims to curb rising subsidy costs and prevent unsustainable growth in the segment. Given the mature state of the market and high renewables penetration in the power mix, Germany will remain the European bellwether for Green Energy.
BMI View: Our medium-term view on the German retail market is optimistic, based on increased consumer confidence, higher salaries and higher retail spending levels. This should see spending on non-essential items rise, particularly in terms of fashion and larger one-off purchases. However, in the longer term the ageing population and the highly developed nature of the market will limit opportunities for retailers.
|Headline Household Spending|
|Household Spending, 2013-2020 (USDbn and % change y-o-y)|
|e/f = BMI estimate/forecast. Source: Eurostat, BMI|
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's tourism market is very mature, and high levels of growth are unlikely. Conversely, it is also well-diversified and should prove robust in the event of any economic event. There is a strong mix of business travellers and cultural tourists, and there are also a number of major cities that are increasingly attractive to tourists from throughout the world. Munich and Berlin in particular are popular, and have experienced a significant amount of investment in recent years as inbound arrivals have grown.
Hotel groups have begun to look at second tier cities for future investment considerations, however. European issues, including the migrant crisis and any economic downturns, would negatively affect demand, but in an attempt to diversify source regions Germany has moved to grow close to Asian Pacific countries (in particular...
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...