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German Industry Expects Output to Grow Despite Weaker Exports

German industrial output is expected to increase at a faster pace this year despite weaker growth in exports, the BDI industry association said in its latest report, which was seen by Reuters on Sunday.

Domestic demand has replaced foreign trade as the main support of Europe’s largest economy, and the government predicts gross domestic product will grow by 1.7%, on a par with last year, despite concerns about an economic slowdown in China and other emerging markets.

“The estimates of the export-oriented industries for export development in the current year remain subdued, according to the recent BDI survey,” the industry association said in its report which will be published in the coming days.

Euro Zone Economy Back to Precrisis Levels

It said German exports would grow by around two percent this year after rising more than six percents in 2015, but domestic demand would help lift overall industrial output growth to 0.75% from 0.5% last year.

“For the automotive industry, foreign trade remains the mainstay, but the domestic market becomes more important for the sector in the current year,” the BDI report said.

Engineering companies expected another year of stagnating sales in 2016, although chemicals companies were more optimistic because of stronger demand from other European countries.

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The German economy expanded by 1.7% in 2015, its strongest rate in four years, driven mainly by robust private consumption and higher state spending on refugees.

BDI head Ulrich Grillo has warned that the success of the industrial sector increasingly depends on external factors such as cheap oil, historically low interest rates and the weak euro, and urged Berlin to boost investment on infrastructure.