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.