In the news
David Folkerts-Landau responds to Fed decision on interest rates
Question: Why is the Fed reluctant to initiate the first rate hike since the 2008 financial crisis - and is that wise?

Answer: It is unfortunate that the Fed let recent bouts of volatility in global markets and concerns about growth abroad – especially in emerging market economies and China – stay its hand. Starting the policy normalisation process now would have been absolutely appropriate and frankly long overdue. [more]
Talking point
Demography and the global economy – “continental” drift is well underway
Continental drift is slow, takes place almost imperceptibly and ends up having dramatic effects in the long run. In this, it is very similar to demographic change. Let us begin with a few facts. The world’s population is set to grow from 7.3 bn today to more than 9.7 bn by 2050. By comparison, the world’s population was a mere 2.5 bn in 1950. The regional (continental) demographic balance has been shifting for quite some time. In 1950, four of the ten largest countries were European (Germany, Italy, USSR, UK). Today, only Russia, ironically the country with the most adverse demographics, ranks among the top-10. In 1950, the big European four made up 10% of the world’s population. This figure has dropped to 5% today and will continue to decline for the foreseeable future. The populations of Africa and Asia will continue to increase significantly – and dramatically so in Africa – over the next few decades (chart). Admittedly, the aggregate increase hides significant intra-regional differences (e.g. East versus South Asia). [more]
Focus Germany: Migration, urbanisation, inflation
Although the external and the financial environment have deteriorated we have lifted our 2016 GDP call to 1.9% (1.7%). Drivers are stronger real consumption growth due to lower oil prices/stronger EUR and the surge in immigration which should ceteris paribus add about ½ pp to consumption (split between private and public). The risks are mainly external (EMs). We lower our forecast for German inflation (national definition) in 2015 and 2016 to 0.3% and 1.3% from 0.5% and 2.0%. The relatively large adjustment for 2016 is due to the weaker inflation development in H2 2015 and due to our expectations of a weaker dynamic in 2016.  [more]
Monitor Corporate funding in Germany
In German corporate lending business, the role played by the different banking groups varies considerably between individual industries. For instance, a relatively large share of loans to the manufacturing sector – and particularly the "core" of German industry, mechanical engineering and automotives – is provided by commercial banks. Lending to construction and agricultural firms, on the other hand, is dominated by savings banks and cooperative banks. The retail banks have also gained significant ground in the services sector over the past 10 years. Landesbanks have only two strongholds, utilities/mining and transport. [more]
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