A flourishing economy raises living standards, creates jobs and fills the public coffers with the funds necessary for such tasks as education, environmental protection and social security.
Economies tend to develop not evenly but in waves. An economic boom with high growth rates and rising employment is followed by a downturn with low growth rates or even declining production and fewer people in work.
In bad times there is a tendency for the government to support demand across the whole economy by means of debt-financed public spending. Often this involves an attempt to stimulate consumption. However, it would make more sense to take measures which strengthen both short-term demand and long-term growth potential, for example by investing in infrastructure and education. However, all debt-financed policies aimed at stimulating the economy run the risk that the debt will not be repaid when business is booming again.
The Business Cycle Traffic Light (Konjunkturampel) captures at a glance the changes in important economic indicators for Germany, the Eurozone, the USA and China.
The German Economic Insitute (IW) publishes bi-annual economic forecasts in which our researchers try to predict economic developments in Germany.
Für Unternehmen ist eine sinnvolle Konjunkturprognose unerlässlich, etwa in Tarifverhandlungen. Wenn nur ein geringes Wachstum prognostiziert wird, ist der Spielraum für Lohnerhöhungen kleiner. Eine Konjunkturprognose ist zudem wichtig für die Investitionstätigkeit der Unternehmen.
The German Economic Insitute conducts regular surveys of German companies, asking about on their current business situation and expectations for the future.
The survey includes producers of raw materials, investment and consumer goods, construction and the services sector but excludes the wholesale and retail trades, the banking and insurance industries and the public sector.
More than a quarter of a century after the fall of the Iron Curtain, the formerly communist eastern states of Germany are making slow but steady progress. Infrastructure is well developed and unemployment is down to single figures. However, per capita economic output has still not caught up with the rest of the country.
The remaining gap is nowhere more apparent than in the DAX, the blue-chip share index of the top 30 companies listed on the German stock exchange: Not one of those companies is headquartered in eastern Germany. On the other hand, eastern Germany now boasts many small- and medium-sized businesses. The labour market is also healthier than it was a few years ago. However, this is the consequence not only of economic success, but also of the fact that many eastern Germans have left the region for lack of prospects. Though this depopulation has now stopped, the demographic transition will continue to affect many parts of eastern Germany. Only such attractive cities as Leipzig, Dresden and Berlin have a good chance of bucking the trend and continuing to grow in the future.
The State provides many goods and services. Ideally, it restricts itself to public goods, such as roads and schools, which could be supplied either not at all, or only inadequately, by the market.
At the end of every year, the German Economic Insitute conducts a survey of employers' associations (Verbandsumfrage) to assess the mood of German business.
Economic growth is not an end in itself. Increasing gross domestic product, i.e. the value of all the goods and services produced in a single year, raises people’s incomes and thus their standard of living. A flourishing economy creates jobs and fills the state’s coffers with the means to finance education, environmental protection and social security.
It is also important to invest in minds: in a sound school education, outstanding universities and modern systems of ongoing in-company training. It is equally necessary to continually invest in capital equipment, such as modern machinery. However, whether investors invest their money in Germany, creating good jobs in well-equipped workplaces, depends to a large extent on the profits which they can expect to make here. If it is to succeed in the competition for investment capital that is now globally mobile, Germany must remain an attractive business location and create the conditions necessary for economic growth.