Talking point
The industrial sector's share in the EU economy is stabilising
Nearly four years ago, the European Commission set its sights on increasing the share of manufacturing in total gross value added from 15.5% at that time to 20% by 2020. This target will probably not be met. After all, in 2015 the share of manufacturing was only around 15.6% and thus scarcely higher than in 2012. However, industry's contribution to EU output has at least stopped decreasing since 2012. Furthermore, industrial gross value added has picked up (slightly) in the EU in recent years in both nominal and real terms. In a few member states, there have been highly contrasting developments in the significance of manufacturing in the economy. It is striking that the industry share in the three large Eastern Europe member states has increased sharply since 2012. Spain and Italy have reported modest gains. Germany has seen its industry share decline slightly in 2015; however, at 22.8% it still far outstrips the EU average. [more]
Monitor Corporate funding in Germany
Loan books with German corporates and self-employed remained virtually unchanged in Q2 (+0.1% qoq / +1.6% yoy). Following strong expansion before, lending to the mechanical engineering/car industry fell significantly, in contrast to continuing robust growth in the services sector. Loan volumes rose at most banking groups, but shrank at foreign banks and Landesbanks. Interest rates declined further and deposit rates could well turn negative soon. Leasing reached a new record level, corporate bond volumes were higher, too. The German economy continued its growth trend also in Q2 (GDP +0.4% qoq), though the drivers changed temporarily. Investment fell substantially and private consumption disappointed as well. By contrast, foreign demand delivered a strong result. The GDP growth forecast was raised slightly for 2016 (to 1.9%) and lowered further for 2017, to 1% (available only in German). [more]
Germany's massive current account surplus set to decline
EMU’s current account (CA) surplus has lent some support to the euro over the past two years at a time of relentless fixed income outflows. Germany is pivotal, as it accounts for 60% of the surplus. Since the rotation of fixed income assets out of Europe is likely to continue (‘Euroglut’) the balance of payments should therefore become even more bearish for the euro. The German surplus is likely to weaken by about 20% to 7% of GDP by the end of the decade due to unfavourable demographic trends, the housing boom and slowing globalisation. [more]
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