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 has gotten 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...
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...
In 2015 and 2016, we expect to see further growth in vehicle sales in Germany, forecasting 5.3% and 4.7% growth, respectively. We project that 0.8% and 0.6% declines in heavy truck sales over the two years will be far outweighed by 5.3% and 4.0% expansion in the passenger car segment, an 8.0% and 3.4% increase in light commercial vehicle (LCV) sales and a 4.2% and 2.0% growth in the coach and bus segment.
Passenger car sales will provide the strongest boost to overall vehicle sales in terms of volume. In 2015 and 2016, the car market will benefit from Germany's consumers ramping-up spending in reaction to positive and robust macroeconomic factors. Most notably, growing real wages, record high labour force participation rates and falling unemployment - which reached a post-reunification low of 6.4% in June - all coupled with record low interest rates will provide the strongest boost to demand.
Adding to this, LCV...
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. Despite the relative maturity of the market, we believe the growth in the country's food and drink industry will maintain its momentum and expand at a compound annual growth rate (CAGR) of 3.6% 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%
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: Despite a marginal increase in government funding for infrastructure and an increasingly buoyant outlook for the German economy, our view that insufficient capital is being deployed in the construction sector remains in place. We forecast a notable slowdown in the overall German construction industry from the 3.7% real growth in 2014, with our prediction of 1.95% for 2015. The residential sector, rail infrastructure and renewables projects remain the market's bright spots.
From 2015-2024, the construction industry will average annual real growth of 1.5%. Growth will remain positive unless the major...
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 remains 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. Whilst austerity measures in the health sector have hit the pharmaceutical industry harder than the medical device industry, measures to restrict the growth in spending on hospital and ambulatory services are inevitably increasing pressure on prices, particularly as many...
Germany's metals sector will continue to feel the squeeze as output prices remain low and costs stay stubbornly high. We forecast subdued growth in consumption of key metals such as steel, copper and aluminium, chiefly due to a muted outlook for economic activity in the country. Key metal consuming sectors such as autos and construction will remain weak. For autos production, we do not foresee a return to growth until 2018 at the earliest.
Illustrative of challenges faced by the wider metals sector, steel mills will remain under significant pressure, as low output prices squeeze margins. This will encourage consolidation of operations and dampen output growth. We forecast that steel production will post only erratic growth in the coming years, as low prices will continue to bite.
|Germany - Crude Steel Production|
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.
Germany's overall chemical output grew sluggishly in H115 on the back of export growth and rising prices, but polymer and petrochemicals output was in decline. Going forward, the industry faces challenges to its competitiveness at a time of external market uncertainty.
Cost pressures have been alleviated by lower naphtha feedstock prices, but there is growing concern over the impact of higher energy costs on enterprises that are. Central to these pressures is electricity tariffs linked to the development of renewable energy that penalise heavy energy users. With producers in North America, the Middle East and Asia unencumbered by these pressures, German petrochemicals companies are moving investment abroad. This will stymie attempts to diversify and add value to petrochemicals output through smaller niche enterprises with high capital costs.
Nevertheless, German exports have been stimulated by the decline in the...
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: The short-term outlook for the German economy is healthy . Our projections indicate that the retail market will witness stable growth in 2015. We expect oil prices to remain lower in Q415 and this will keep on providing additional funds for consumers to spend. HHousehold spending will continue to increase in 2015 which would particularly benefit non-essential and luxury goods retailers.
The overall growth in the German economy is healthy and relatively strong compared to some other developed countries. Overall global economic growth remains slow...
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...