Economic revival more and more sustained by domestic demand

The most recent surveys on the business climate in the Eurozone conducted by the ifo Institute show that the economy is doing well and also indicate a sustained development in the industrial production. According to the most recent »Euro-zone Economic Outlook«,business in the German industry will gain further momentum in the second half of 2007 and grow by another 0.9% in the third and fourth quarter each after a growth of 0.7% in the second quarter.

This upturn is in particular reflected by a booming demand for capital goods and stabile consumption by private households, explained the ifo Institute its forecast.

Ifo Experts say that the increase in investment would accelerate from 1.0% in the second quarter to 1.4% in the fourth quarter and consumption is said to increase by 0.8% in the second quarter and by 0.7% in both the third and fourth quarters after it had temporarily stagnated in the first quarter in the wake of the VAT increase in Germany.

The GDP in real terms would increase steadily by 0.7% in each quarter so that average annual growth is expected to amount to 3% in 2007. Assuming that the oil price will stay at about 70 dollars per barrel and the Euro-Dollar exchange rate at about 1.35 the inflation rate will remain at 1.9% in the third quarter and rise to 2.2% in the fourth quarter. The annual average inflation rate is thus expected to be 2%.

Further findings and details are available online. GERMAN