17. May 2016

The state of the Bavarian economy is good – but the expectations are uncertain

How well is the Bavarian economy doing – and where is it going? To answer these two questions, the Bavarian Industry Association (vbw) has developed a comprehensive index, based on 31 individual factors, which offers an accurate reflection of the state and direction of the Bavarian economy.

Released twice a year, the vbw Index is represented graphically by the fill level of a tall wheat beer glass – a popular beer style in Bavaria served in a uniquely shaped glass. In addition to the overall index, the vbw also publishes four sub-indices which all range between 0 and 200 points – 100 being the long-term average.

Spring 2016 edition of the vbw Index

In its latest Spring 2016 edition, the overall vbw Index of the Bavarian economy stands at 131 points – one point more than in the fall of 2015.

The sub-index current growth dropped by two points to 136. This was mainly driven by the business expectations, but also by hard data such as industrial output. The sub-index expected growth currently sits at 122 points – one point above the level in the last fall.

The sub-index current employment continued to improve thanks to a continuous rise in employment. Since the last edition, it rose by four points to 137. The sub-index expected employment also registered a slight uptick of one point to 128 due to a decline in job vacancies compared to last fall.

Current situation good, expectations uncertain

The overall picture of the Bavarian economy is positive. Bavaria’s GDP rose by 2.1 percent in 2015 – more than the German average of 1.7 percent. However, Bavaria fell behind five other German states in terms of growth. The vbw expects Bavaria to grow by 1.8 percent this year.

Improving the location factors

Industry is of particular importance for the Bavarian economy. To secure value creation and employment in Bavaria, it is essential to create favourable and competitive economic conditions.

In particular, these concerns must address labor costs, the cost and availability of energy as well as the need for cutting regulation and red tape. The pension system must also take into account and plan for demographic change and higher life expectancies.

Private consumption remains an important driver of economic growth. Therefore, sectors such as retail, hotels and restaurants, services and the craft trades can look optimistically ahead. The picture for the construction sector is mixed, and the outlook for industries in general is cautious. Industries are affected by a weak and unstable world economy as well as a global lack of investment.


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Volker Leinweber

Volkswirtschaftliche Grundsatzfragen

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