KfW Research forecasts the annual average growth rate of the gross domestic product (GDP) in Germany and the Euro Area in quarterly intervals. GDP is a key measure of economic performance. It measures the value of goods and services newly produced within the domestic territory in a specific period of time. The percentage change of GDP adjusted for price effects, i.e. real economic growth, is the most important and most widely recognised business cycle indicator. The KfW Business Cycle Compass focuses on predicting real GDP growth rates for the ongoing and for the coming year.
Furthermore the forecast for consumer price inflation in Germany and the Euro Area is a regular component, alongside anticipated greenhouse gas emissions that are consistent with predicted economic growth. KfW Research has developed its own approach to calculate the climate cost of growth (see Focus on Economics No. 400(PDF, 214 KB, accessible)), to which the info box "Ecological price tag for GDP" has been dedicated since the Autumn Forecast 2022.
How the KfW Business Cycle Compass is constructed: Our GDP forecasts are based on the unadjusted results of two econometric models, which are used to deduct forecasts for the annual average growth rates for the ongoing and coming year, as well as the quarterly growth rate for the current quarter, using financial and real economic leading indicators. In an intensive discussion process, these model results are compared with qualitative expert assessments, which also include non-modellable qualitative factors. The result is an economic forecast that fits consistently into our scenario for Europe and the global economy.
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