As expected, the German economy shrank in the second quarter 2008. However, Germany is not heading for recession. Economic momentum is likely to pick up again in the fourth quarter. Coupled with the revision to first quarter growth figures, we have lowered our forecast for 2008 as a whole from 2.3 % to 2 %.

The Ifo business climate index slipped far more sharply than expected in July. The main culprit is likely to have been the relentless rise in energy prices up to mid-July. Without doubt, the oil price now looms as by far the largest threat to the economy, not only in Germany.

In 2007 earnings of the 30 DAX-listed companies rose sharply. Will this positive trend continue this year? In our Working Paper “No grounds for earnings pessimism” we come to the conclusion that, after four years of brisk increases, the trend in 2008 is likely to be more moderate. But it is encouraging that, even in such a tempestuous year as 2008, the upward trend in earnings will probably not be interrupted.

The German economy recorded surprisingly strong growth in the first quarter of 2008, as the Federal Statistical Office announced today. And, despite the looming slowdown as the year progresses, in 2008 as a whole the German economy looks set to grow more strongly than hitherto expected. Against this backdrop we have raised our forecast to over 2 %.

The momentum on the German labor market is unbroken. Month for month the seasonally adjusted jobless total is not only falling, but falling as a rule by more than expected. In October 2008 the number of people unemployed looks set to drop, at least temporarily, to below the 3-million mark for the first time since 1992.

Some things in life are simply too nice to get used to. In some way this also applies to the German labor market: in December 2007 the picture again improved substantially more than expected, underpinning our hope that private consumption will be the engine of growth in 2008.

Both Germany and the euro area saw growth momentum more than double in the third quarter. But things will not remain so sprightly in the winter half-year.

With the report’s overall motto of “don’t squander what has been achieved“, the Council of Economic Experts hits the nail on the head: it correctly affirms that policymakers have contributed to Germany’s economic comeback with in part radical reforms. However, the Council bemoans the risk that correct and groundbreaking reforms will be undermined or indeed revoked altogether. Against the backdrop of the current discussion on entitlement periods for unemployment benefit, employee subsidies, temporary work regulations and minimum wages, the Council enjoys our full support.

Although the Ifo business climate slipped slightly in October, given the wobbles on the financial markets, the tumbling dollar and the soaring oil price the scale of the deterioration in sentiment is surprisingly small. The business climate is still at a high level and is in line with overall economic growth of around 2 ½ %. This is shown by correlation analyses.

The Economic Research Institutes presented their autumn report today. The report warns against departing from the path of economic policy reform. We can only fully endorse this appeal. The government risks coming to a halt halfway.

The number of people out of work fell sharply in September. In seasonally adjusted terms the unemployment rate reached a 14-year low of 8.8 %. And the trend looks set to continue.

All in all the financial turmoil triggered by the US housing crisis will not leave the European economy completely unscathed but the impact will be largely confined to those countries where the economic and debt picture most resembles that of the US. This means Spain and, to a lesser extent, the UK. For the euro area we now expect growth of 2.1 % in 2008 (previously 2.2 %). Our 2008 forecast for Germany remains unchanged (2.5 %).

Given the current financial market turmoil the latest decline did not really come as a surprise. In fact the drop was even somewhat smaller than feared.

The German economy grew less than expected in the second quarter 2007. Together with its flash estimate for the second quarter, the Federal Statistical Office also presented revised figures for the last four years. We see economic momentum accelerating again in the second half of the year and are sticking to our forecast for the year as a whole.

The drop itself was not a surprise. But the scale of the correction was somewhat unexpected. Even in January, when VAT was jacked up, the drop was not as sharp as in the latest survey. Nonetheless: no cause for alarm!

Figures released by the Federal Statistical Office today show that the slowdown in economic growth in the first quarter of 2007 was weaker than expected. Together with the flash estimate for the first quarter, growth rates for last year were also revised upwards slightly. We expect the positive economic trend to continue over the rest of the year. Against this backdrop we have decided to upgrade our growth forecast for this year substantially.

In the fourth quarter 2006 the German economy recorded surprisingly strong growth, as the Federal Statistical Office announced today. Together with the flash estimate for the fourth quarter, growth rates for the preceding quarters were also revised upwards. In conjunction with the positive news still coming from the labor market, this has prompted us to raise our growth forecast for this year appreciably.

As a rule the seasonally unadjusted jobless figure rises steeply in January. In recent years an increase in the region of 400,000 was normal. This January, however, it is not only the weather which appears unusual: with an increase of 239,000 the rise in the jobless total was surprisingly low this year.

The January figures paint a relatively clear picture. Following a small dip in the first quarter, the German economy will pick up momentum noticeably over the rest of the year.

Total private financial assets probably reached EUR 4.53 trillion at theend of 2006, some EUR 240bn more than at the end of 2005. Investment decisions in 2006 were again tinged with caution.