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Steady growth ahead for strong, stable market

If the world has been on something of a rollercoaster ride in the past 12 months, then Germany’s year has been more akin to a gentle spin on a playground carousel.

 

It is true that the 2017 election highlighted divisions in voters’ sense of how they see their country evolving, and the fact that years of economic growth have not benefited all Germans to the same extent. At the time of writing, the longtime-majority party in government, the Christian Democratic Union, was still negotiating with minor parties on forming a coalition.

 

But these are mere blips along a steady trajectory compared to what most of the rest of the world has been going through.

 

German employment is high – staggeringly so compared to many of the markets around it – with unemployment under 4 percent for much of 2017.

 

GDP is ticking over nicely compared to much of the rest of the region, with forecast growth of 1.4 percent in 2017 and 1.3 percent predicted for 2018. Inflation is about where most economists say it should be – at 1.8 percent  – and Angela Merkel, the German Chancellor who has served since 2005, is still at the helm.

 

As a result, consumer confidence is high – OECD figures show a slight dip around the time of the election but otherwise world-beating levels of positivity. There are signs that although savings rates are high, consumers are starting to loosen their grip on the purse strings a little. Retail sales in August 2017 were 2.8 percent higher than the same month a year earlier, driven mainly by non-food sales and a boom in mail-order and online shopping, national statistics show.

 

Businesses are similarly optimistic. Low unemployment and steady government spending are underpinning growth in private consumption, and exports are buoyant thanks to strong demand from Asia and the US, although growth in exports to China are slowing. Official figures show exports in July 2017 (the latest available) were 8 percent higher than in July 2016.

 

The Munich-based economic research group CESifo tracks business sentiment month by month, and while positivity slipped slightly in September 2017 from 115.9 points to 115.2 points, it still remains way above its long-term average of 102.1 points. On the organization’s traffic light system, which indicates the probability of future growth, the country is safely within the green zone.

 

Changing gear

 

This is an economy that is gradually changing, with a focus on technology and the environment, often both at the same time. Germany’s major carmakers have announced ambitious plans to invest in mass production of electric cars, a move that chimes with announcements by other carmakers and signals the way mobility is changing. In Germany, the shift also helps put clear water between the days of the Volkswagen emissions scandal and the German auto industry of the future.

 

The country has committed to shutting down its controversial nuclear power plants by 2022, due to long-held concerns about safety, particularly following the Fukushima disaster in Japan, but also as part of a wider program, Energiewende, to switch to renewable energy sources.

 

On the World Economic Forum’s networked readiness index, which assesses the factors, policies and institutions that enable a country to leverage information and communication technologies (ICT) for increased competitiveness and wellbeing,

Germany is ranked 15th out of 139 countries. Singapore is top, followed by Finland, Sweden, Norway and the United States.

And on the European Commission-supported European Digital City Index, which describes how well different cities support digital entrepreneurs, nine of the top 60 countries are German, with Berlin flying the flag for Germany in sixth place.

Berlin’s artistic heritage combines with entrepreneurial talent from all over the world, fuelling startups that tend to cluster around the Torstrasse, otherwise known as Silicon Alley. The capital is also home to Factory Berlin, a Google-backed co-working space that describes itself as Germany’s largest startup campus. And the Betahaus space for startups has branches in both Berlin and Hamburg. Startups to have emerged from Berlin include Soundcloud, Zalando and Food Panda.

 

Munich is another digital hotspot, as is Hamburg – birthplace of transport startups Mytaxi and Wunder, data company Statista, and financial technology company Kreditech. Frankfurt, Cologne, Karlsruhe, Düsseldorf, Stuttgart and Dresden all make the Digital City Index as well.

 

For several years, the government has been encouraging businesses to be more innovative, and adapt to changing technological opportunities and the changing demands of consumers.

 

At the opening of a privately built Euro 50 million research and innovation center in Allendorf in 2017, Chancellor Merkel spoke of the digitization of industry and the economy. “What is really exciting is that one can build a completely new relationship to the customers. Consumers want individual products, they want to know how to use a product best.”

Her government has been encouraging German businesses to apply the skills that have made them leaders in B-to-B services to the consumer market as well.

Businesses like adidas, with its new SpeedFactory in Bavaria, that can make small batches of specialized footwear, are setting the pace. SAP and BMW are developing a connected car that not only directs you to fuel when you’re running low, and can find an available parking space, it also presents you with special offers from third parties based on what it knows of your location, route and preferences.

Gaps to fill

Technological advances are showing what’s possible, and should be inspiring brands to look beyond what have traditionally been their categories to get closer to consumers and deliver products and services that improve people’s lives.

 

People are looking for not just a better life for themselves, but a future they can believe in and a partnership with the organizations they feel are listening to them and that share their views.

 

Brands in this climate must create the right products, of course, but must have something to say that goes beyond what’s good about what they’ve made. It is a brand’s ability to make a meaningful connection with a consumer that matters most. They can be not just present but also relevant to consumers, enriching people’s lives, even in small ways.

 

Successful German brands are telling stories that resonate with people’s lives, delivering on the increasingly complex relationship that consumers expect brands to play in their lives.