Oxford Economics Cuts Germany’s 2027 Growth Forecast to 1.2%

what happened

The rebound in oil prices above $100 a barrel is hurting Germany’s economic outlook, Alexander Valentin of Oxford Economics said in a note. Dow Jones Newswires reported that Oxford Economics raised its 2027 inflation forecast for Germany by 0.5 percentage points to 2.8%, as higher energy costs are expected to intensify pressure on real incomes.

Against that backdrop, Oxford Economics lowered its forecast for Germany’s 2027 GDP growth by 0.2 percentage points to 1.2%. The organization now expects private consumption to expand by only 0.6% next year, compared with its previous projection of 0.9%.

Valentin also said the risk of additional ECB rate increases has risen. Oxford Economics expects the ECB to keep rates unchanged this month, although it sees the possibility of back-to-back hikes after September’s move as not negligible.

why it matters

For markets, the update combines weaker German growth expectations with stronger inflation pressure. A higher perceived risk of further ECB hikes may affect expectations for the euro and European bonds, while the consumption downgrade is relevant to the outlook for German equities.

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