The economic situation has deteriorated further. The economy islikely to shrink this quarter and next. However, we do not expect aprotracted recession. The purchasing power gains on the back of thesteep drop in commodity prices, coupled with the weaker euro, are setto have an increasingly stimulating effect during 2009.

The German economy is heading for stagnation in the second half of 2008. The economic engine had already stalled in the second quarter. In the fall the sentiment indicators clouded over further mainly due to the financial market crisis, and the “hard data“ also provide little cause for optimism. However, assuming that the financial market crisis gradually loses its sting in the early months of 2009, we see good prospects for a moderate pickup in the economy next year.

There is currently little to suggest that economic momentum will pick up appreciably by the end of the year. However, in particular the headaches caused by oil prices are set to ease gradually over the coming months. Consumption could be the main beneficiary of this in the year to come.

First the price of oil keeps climbing for so long that even the stronger economies start to get out of puff. Then, in reaction to the worsening global economic situation, it suddenly starts to fall considerably. If the price continues to drop, it may prove to be a very effective stimulus package.

The price of oil has continued to soar recently. It is now, without doubt, the greatest threat to the economy. The longer it remains atthe current level – or even rises higher – the greater the danger that the economic summer break will not remain just that.

There is much to suggest that the German economy will already slow down considerably this quarter following the rip-roaring start to the year. Whether this will just be a summer recess for the economy depends not least on further oil price developments.

After the surprisingly strong start to the year, the German economy is expected to slow down appreciably as early as this quarter. Even though the economy is not likely to pick up markedly before the fourth quarter, GDP still looks set to grow at a rate of over 2 % this year.

Following what was probably a fairly buoyant first quarter the German economy is likely to lose momentum in the coming months. Fundamentally, however, it will remain on an expansion path. Having languished for years, private consumption is likely to provide a substantial boost in 2008 given healthy labor market data and rising wages. In early 2008 the world economy and international financial markets are very much under the aura of the US real estate crisis. Economic growth in the euro area already lost appreciable momentum in the fourth quarter of last year. With the pace of growth set to remain weaker in the first half of this year, we expect the EMU economy to expand by 1.8 % in 2008, accelerating slightly to 2 % in 2009.

Positive economic indicators have clearly predominated in recent weeks. There is growing evidence that the German economy got off to a better start in 2008 than initially assumed. Even private consumption started to show signs of a modest pickup in the first quarter.

As expected, the German economy lost momentum in the fourth quarter of 2007. Current economic indicators, however, encourageus to believe that the economy will pick up speed again in the second quarter. But defending Germany’s title as world champion in exports may prove to be more difficult.

Although private consumption clearly disappointed last year, we expect it to become the mainstay of economic development in 2008. This is indicated above all by the sustained positive trend on the labor market. This impetus is also necessary as the traditional economic driver foreign trade is losing momentum.

The downside factors for the German economy have increased appreciably. High oil prices and the strength of the euro inparticular are crimping growth prospects for next year. Nevertheless, buoyed by private consumption, the upturn is likely to continue – albeit less dynamically.

The oil price is at a record high, the euro is going from strength to strength, and the US economy is slowing down. There is no doubt that the growth risks facing the German economy have mounted over the past few months. But there is still reason to believe that the upturn in Germany will continue, albeit at a somewhat slower pace.

The fallout on German economic activity from the correction on the US housing market and the liquidity crisis that erupted in its wake will be very limited. The analysts expect the German economy to continue expanding moderately in the second half of 2007 amid a slight overall deterioration in the overall backdropand then to grow by 2.3 % in 2008. Investment will continue to boost growth in 2008, and private consumer spending, which has fallen well short of its potential in 2007, will also make a key contribution.

Although economic growth was disappointing in the second quarter, we are sticking by our forecasts for this year as a whole. Increased stimulus is likely to come from private consumption in the second half of 2007. We do not expect the current financial market crisis to have a substantial impact on further economic development in Germany.

Even if a number of economic indicators have painted a somewhat weaker picture than expected over the past few weeks, Germany's upswing nonetheless remains intact. At present, we still see the mounting fears that a shortage of skilled labor could soon slam the brakes on economic performance as clearly exaggerated.

With only a few exceptions, the current economic indicators paint a pretty clear picture: the economic upswing in Germany is continuing. Particularly encouraging: the improvement on the labor market has picked up speed again of late.

The German economy lost less momentum than expected in the first quarter of 2007, thanks primarily to strong investment growth. Following the slump at the beginning of the year, private consumption is expected to make a considerable recovery during the course of the year. All in all, we now expect real GDP growth of 2.5 % for 2007.

According to the latest economic indicators, the economy has largely overcome the dip seen at the start of the year. Nevertheless, there is still a degree of uncertainty with respect to this year’s economic forecast.

The VAT hike in Germany resulted in only a temporary slowdown in growth. The economy will regain momentum in the second half of the year. The upswing on the labor market will help to stabilize growth. In addition, the encouraging investment backdrop and the rosier outlook for private consumption will also have a positive effect. As a result we have revised our forecast up slightly. For 2007 we now expect to see GDP growth of 2.0 % (previously 1.8 %). In 2008 growth looks set to come in at 2.5 % (previously 2.3 %).