INSTITUTES DIVIDED ON OUTLOOK FOR GERMAN ECONOMY
  The five leading West German economic
  research institutes have failed to agree about how strongly the
  domestic economy will expand this year but revised down
  forecasts contained in a report published six months ago.
      The three research groups of Kiel, Hamburg and Essen
  predicted in the institutes' joint spring report that gross
  national product (GNP) would rise by two pct in 1987, compared
  with 2.4 pct in 1986. The five institutes had jointly forecast
  three pct 1987 growth in October last year.
      Taking a dissenting view, the DIW institute of West Berlin
  and Munich's Ifo institute predicted only one pct 1987 growth.
      The joint report said that the estimates of economic
  development made by the DIW and Ifo were "markedly less
  favourable" than those of the other three.
      The DIW and Ifo forecast the economy would pick up after a
  slow start to the year. "In the second half of 1987 there will,
  however, only be a weak upward movement," they said.
      The two institutes said external economic factors which
  were currently damaging exports and pushing up imports would
  dominate the economic environment throughout the year. They saw
  exports falling by a real 2-1/2 pct in 1987 and predicted no
  marked improvement in the course of the year.
      The other three institutes, however, wrote: "The decline in
  demand and production (seen) in the winter months does not
  indicate the beginning of a cyclical downswing."
      They said the sharp rise of the mark had led to corporate
  uncertainty and companies had not carried out investment plans.
  But they expected that many investments had not been cancelled
  but only put off. "It can be presumed that the braking actions
  (on the economy) will diminish markedly this year."
      They added: "The domestic prerequisites for a continuation
  of the economic uptrend are still favourable."
      These three institutes said diminishing external burdens
  combined with favourable domestic conditions meant an upturn in
  demand and production could be expected by the spring.
      However, this projection was clouded by risks including the
  further development of the mark against the dollar.
      Contrary to the DIW and Ifo, the three institutes said that
  while exports would continue to be the weak point of the
  economy in 1987, "there is good reason to believe that exports
  will soon bottom out and that a slight rise will emerge during
  the course of the year." They predicted an overall 0.5 pct fall
  in exports in 1987, the same as in 1986.
      The three more positive institutes saw private consumption
  rising by four pct in 1987, compared with 4.2 pct in 1986,
  while DIW and Ifo predicted a three pct increase.
      They saw the climate for equipment investment improving but
  predicted only a rise of four pct in 1987 against 4.6 pct in
  1986. Ifo and DIW saw these investments rising by only two pct.
      All the institutes predicted only a slight decline in
  unemployment. The Kiel, Hamburg and Essen institutes said the
  jobless total would average 2.17 mln in 1987 compared with 2.23
  mln in 1986 and predicted a rise in the number of people in
  work of about 200,000.
      These three institutes said new jobs would be created
  mainly in the private services sector and also by the state in
  the context of job creation measures. The construction industry
  was likely to engage new workers for the first time since 1980
  but they predicted either no rise in employment in the
  manufactured goods industry or only a slight expansion.
      The DIW and Ifo said rises in employment would occur only
  in the tertiary sector, while "the number employed in the
  manufacturing industry will decline."
      The DIW and Ifo said unemployment would only decline to
  2.20 mln in 1987 from 2.23 mln in 1986.
      They saw the current account surplus falling in 1987 to 58
  billion marks from 78 billion in 1986. The other three saw a
  current account surplus in 1987 of at least 60 billion marks
  and predicted that the trade surplus would fall to only around
  100 billion marks from 112 billion in 1986.
      The institutes agreed that consumer prices would start to
  rise in 1987, after they declined in 1986, and all five
  predicted an average increase over the year of 0.5 pct.
  

