According to the six German economic research institutes the economic upswing has gained substantial momentum this year and is going to continue next year. For 2006 the institutes expect the gross domestic product to increase by 2.3 percent in real terms whereas they forecast 1.4 percent for next year. Reason for the smaller increase in 2007 is a temporary economic slowdown expected for the first quarter of 2007 mainly due to the VAT increase.
However, given that there is a sustained increase in investment, this temporary slowdown will soon be overcome so that the economy will re-gain momentum during the rest of 2007. This assessment represents the compromise reached after combining the more sceptic and the more optimistic opinions voiced by the several forecasters involved. According to them the one-off price push caused by the VAT increase should neither give rise to more restrictive monetary policies nor should it lead to renewed wage bargaining. For 2006/2007 the institutes forecast a marked increase in employment by almost half a million people as well as an even stronger decrease in the number of unemployed people. By and large this economic picture corresponds to that drawn by the Federal government.
The government autumn forecast will be officially published today at 12:30 on the occasion of a press conference. 