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Last Published: 8/29/2019

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The German economy is the fifth largest in the world and accounts for one-fifth of the European Union’s GDP. Germany is the United States' largest European trading partner and the sixth largest market for U.S. exports. Germany’s "social market" economy largely follows market principles, but with a considerable degree of government regulation and wide-ranging social welfare programs.
Germany is the largest consumer market in the European Union with a population of 82.4 million. The significance of the German marketplace goes well beyond its borders. An enormous volume of trade in Germany is conducted at some of the world’s largest trade events, such as MEDICA, the Hannover Fair, Automechanika, and the ITB Tourism Show. The volume of trade, number of consumers and Germany’s geographic location at the center of the European Union make it a cornerstone around which many U.S. firms seek to build their European and worldwide expansion strategies.
As of April 2019, the German government and economic forecasters expect between 0.5% - 0.8% GDP growth for 2019. However, all forecasters expect a rebound of the German economy in  the second half of 2019 and up to 1.5% GDP growth in 2020, a number which many analysts consider Germany’s long-term growth potential (c. 1.5%/year). Demand has begun to shift from exports to consumption and investment, which are projected to remain the main driving force for growth in the near-term. Despite budget surpluses and strong corporate profitability, investment (other than construction) remains somewhat subdued.
Employment in Germany has continued to rise for the thirteenth consecutive year and reached an all-time high of 44.8 million in 2018, an increase of 562,000 (or 1.3%) from 2017—the highest level since German reunification in October 1990.
Unemployment dropped by half since its peak in 2005, and in 2018 reached the lowest average annual value in almost three decades. The number of unemployed stood at 2.34 million in 2018, down 193,000 from 2017, with an average unemployment rate of 5.2% (down 0.5 percentage points compared to 2018), according to official government statistics. Using internationally comparable data from the European Union’s statistical office Eurostat, Germany had an average annual unemployment rate of 3.4 percent in 2018, the second lowest rate in the European Union (EU). Germany’s national youth unemployment rate was at 6.2 percent in 2018 - the lowest in the EU.
Demographic changes and resulting labor bottlenecks, regulation of the labor market, and higher energy prices due to the phase-out of nuclear energy in favor of renewable sources (“Energy Transition”) are seen as factors that could dampen competitiveness. Experts also fear that international trade tensions and Brexit might substantially hurt the export-oriented German economy.  Despite these fears, no economic institute currently foresees stagnation or true recession and many actually view growth rates of around 1.5% rather as “a return to normal” after an interim boom.

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