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The German economys Achilles heel

March 4, 2019
Region:
The recession in German industry can be traced to the massive slowdown of global trade in 2018. Will the German service sector withstand the recession in industry, as some recent survey data seems to suggest? We doubt it. In previous downswings in the manufacturing sector services were pulled lower, too. Indeed, the two sectors' output trends during 2018 did already follow this pattern. (Also in this issue: Economic Minister Altmaier's National Industrial Strategy 2030, the German Federal Budget, lower total and rental inflation thanks to new basket, corporate lending in Germany, the view from Berlin) [more]

More documents about "Germany"

232 (169-180)
January 27, 2015
Region:
Analyst:
169
SMEs' access to finance problem constitutes a considerable impediment to the recovery in many European countries, therefore prompting calls for policy action. Among the options to spur bank lending to SMEs, covered bonds backed by SME loans are currently discussed as a potential remedy. Despite SME-covered bonds offering lucrative features for investors and issuers alike, there are significant constraints that may limit their potential to revitalise bank lending to SMEs for the time being. [more]
January 9, 2015
Region:
Analyst:
170
Germany's service sectors have shown themselves to be keener to invest than industry in recent years. The net fixed assets held by the service sectors grew by almost 28% in real terms between 1995 and 2012, although their growth rate has slowed over time. By contrast, the capital stock in the industrial sectors has shrunk by 1.6% in real terms. While, on the one hand, politicians in Germany have been expressing regret or even voicing criticism over the country's current lack of capital spending, on the other they have recently introduced measures (such as their policies on pensions and labour markets) that are hampering investment in Germany rather than stimulating it; this approach is inconsistent. [more]
January 6, 2015
Region:
171
Following a weak winter half in 2014/15 the economy looks likely to regain its footing as 2015 progresses. However, sluggish performance at the turn of the year means growth will probably average only 1% in 2015 after 1.4% in 2014. It is encouraging, however, that private consumption should remain a major pillar of growth, whereas net exports are likely to have a neutral impact. Nonetheless, signs are increasing that some – in our opinion misguided – economic policy moves (such as the introduction of a nationwide minimum wage as well as an enhanced pensions package) are weighing on the labour market and thus on consumption. Given a weakening of cyclical activity and the costs of economic policy measures, we expect the general government budget to be slightly in deficit in 2015. [more]
December 2, 2014
Region:
172
Underlying growth of the German economy has slowed in Q3. After average quarterly growth rates of over 0.3% qoq in the last 1 ½ years, GDP expanded just 0.1% in Q3. We expect about stagnation in the next two quarters with a risk of a negative print as sentiment has weakened further in October/November. The little momentum of global trade since 2012 points towards structural changes, which will affect German exports in particular. German export growth should therefore remain relatively muted during the next few years. We forecast average real German export growth at the lower end of a range of 4%-6% between 2014 and 2019, which should be buttressed by a depreciation of the euro. [more]
November 13, 2014
Region:
Analyst:
173
German engineering firms must prepare to confront several trends over the medium term. The first of these is that a new, bipolar world of engineering markets is emerging. The United States and (once again) China are set to become especially promising centres of growth going forward. Further future trends are, secondly, the gradual shift in product focus towards customised system solutions; thirdly, the growing importance of not purely price-related competitive factors; and fourthly, the reconfiguration of the global division of labour in the engineering sector as the classic distinction between producer countries focusing on standard machinery and others focusing on speciality equipment becomes increasingly untenable. Provided that traditional suppliers to the manufacturing sector manage to spot the new mega-trends in good time, they will be able to build on these to develop promising strategies that enable them to adapt, survive and – ultimately – grow. [more]
November 11, 2014
Region:
174
In sections of the financial industry there are many web- and data-based financial products and services that customers cannot obtain from either their bank or a similar provider. Non-bank, primarily technology-driven providers are increasingly entering the markets for less knowledge-intensive and easily standardisable financial services. Despite valuable comparative advantages that traditional banks have to offer they need to undergo a radical course of innovation therapy during the digital transformation process. To this end modern data analysis methods should be used just as routinely as a seamlessly integrated web of all distribution channels. Modern technologies and appropriate finance-specific internet services need to be implemented efficiently and above all in a timely manner. Strengthening one's own brand and identity as well as the obligation to handle client data confidentially will also help to deliver a sustained increase in customer satisfaction and loyalty. [more]
November 5, 2014
Region:
175
We have cut our German GDP growth forecast from 1.5% to 1.3% for 2014 and further from 1.5% to 0.8% for 2015. We do not see Germany falling into a technical recession in Q3. But the 6 month slump of the ifo index has increased the risk that we might see a negative GDP print in Q4 2014 or Q1 2015. The positive effect of weaker oil prices will be offset by wage growth slowing from 3% plus this year towards 2% in 2015, as export-orientated sectors will respond to weaker external demand. Further topics in this issue: German industry: Temporary slowdown; German construction: Robust investment, but price momentum slowing; Inheritance tax: Constitutional Court ruling likely to weigh harder on business heirs; 25 years after the fall of the Berlin Wall: "Blooming landscapes" only in part. [more]
October 30, 2014
Region:
176
Following weak performance in winter half-year 2014/15 industrial production in Germany is likely to return to a moderate uptrend in the course of 2015, resulting in expansion of roughly 1.5% in real terms in 2014 and about ¾% in 2015. This means the generally muted dynamics of industrial performance in evidence since 2011 would continue in 2015. Industry's share in total German gross value added (2013: 21.8%) will probably decline again, as in 2012 and 2013. The only moderate growth of industry is primarily attributable to the currently subdued level of business activity and external shocks. Nonetheless, structural factors are going to regain importance. The ball is now in the politicians' court. Many of their recently adopted measures give rise to fears that Germany's international competitiveness as an industrial location is likely to decline. [more]
October 29, 2014
Region:
177
Why are German wages/inflation not responding? Much of the answer lies in cultural factors and personal traits which manifest themselves in a high aversion to inflation. This in turn has led to Germany’s unique economic fundamentals and institutions. At the core it seems that Germans and German society can handle distribution conflicts involving time inconsistency problems better, on average, than many other nations. Given the German peculiarities the ECB has more time to run its supportive policy without creating new imbalances in the largest EMU economy. Therefore the ECB has scope to extend its balance sheet via private and most likely public QE. [more]
September 30, 2014
Region:
178
The recent positive surprises provided by real economic indicators have for now banished concerns that Germany might slide into recession in Q3. However, the ongoing geopolitical risks and the question marks hanging over the expected cyclical upturn will probably lead to weaker growth in exports and company investment. That is why we have scaled back our growth forecast for the winter half-year 2014/2015. Thus, we have lowered our forecast from 1.8% to 1.5%. In our current issue we also address Germany’s fiscal position, we analyse the consequences of potential Russian gas supply disruptions and we take a look at the investment behaviour of German households. [more]
September 2, 2014
Region:
179
German GDP only 1 ½% in 2014, considerable risks for 2015. We have scaled back our GDP forecast for 2014 from 1.8% to 1 ½%, as we now expect weaker growth in H2. This also reduces our forecast for 2015 from 2.0% to 1.8%. The risks that this still constitutes an overly optimistic forecast have increased significantly. The German investment cycle will likely be more subdued than expected due to the ongoing weakness of world trade and increasing geopolitical strains. Even the hitherto still robust private consumption is emitting its first warning signs. [more]
August 27, 2014
Region:
Analyst:
180
Besides transport and energy infrastructure, communications infrastructure is steadily gaining in importance in the regional competition to attract investment. One source of concern in particular though is the significant gulf in investment both between west German and east German federal states as well as between urban and rural regions. This is compounded by the problem that there is usually no viable business model for projects in rural areas without government subsidies. As there is no such thing as a standard blueprint for the broadband rollout with its huge investment requirements, every single project with its specific local features needs to undergo a critical economic feasibility analysis. On this basis, efforts should be taken to work out the best rollout model in terms of technology, funding and time horizon, respectively. In essence, the broadband rollout in Germany requires more government stimuli to foster private investment, but these efforts need to be coordinated and based on sound judgement. [more]
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