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Only a technical recession? It is all about risks!

August 19, 2019
Region:
We see Germany in a technical recession, as we expect another ¼% GDP drop in Q3. Our forecast for 2019 is now 0.3%. Given no indication for a rebound we lowered our 2020 forecast to 0.7%. We acknowledge these revisions do not properly account for the recent accumulation of risks. Given the increasingly fragile state of the global economy, the realization of one or more risks could easily push the economy into a completely different scenario, where growth revisions of a few tenths of a percentage point will not be sufficient. (Also in this issue: German automotive industry, chemical industry, house prices, corporate lending, the view from Berlin, digital politics.) [more]

More documents about "Germany"

290 Documents
December 3, 2020
Region:
1
Mankind has survived all kinds of pandemics, even the plague. However, humans are ill-equipped when confronted with an invisible danger. Moreover, the COVID-19 pandemic has four important features which almost certainly overstretch the human analytical capacity: Time-lags, external effects, nonlinearities and complexity. We cannot escape our biases when deliberating COVID-19 . But being aware of them might yield more cautious and less apodictic views. Our evolutionary success can be traced to the fact that we became “social animals” with these biases often enhancing a smooth cooperation. Now it is on the society and its institutions to make sure that they do not cause people turning against society. [more]
November 27, 2020
Region:
2
Early this year, the government had to put together massive bailout and aid packages in next to no time in order to avert an imminent economic collapse. However, cash outflow from immediate assistance and interim aid schemes have so far fallen considerably short of the expectations. As a result, the funds budgeted for this purpose have not been nearly utilised to their full extent. In light of November’s partial lockdown, the government has now decided to increase the dose of its financial aid to solo self-employed, freelancers as well as small and medium-sized companies. Consequently, the mere ripple of support often bemoaned in this area could ultimately gather enough strength yet to become a mighty wave. The provision of aid over the further course of the crisis is to be strictly guided by necessity, effectiveness and appropriateness as fiscal resources are limited and the state cannot provide unlimited comprehensive cover. [more]
November 6, 2020
Region:
3
The corporate sector in Germany and particularly SMEs have become more resilient in terms of funding which should help them weather the corona shock. Current financing conditions also remain favourable: banks have hardly tightened lending standards, the government has issued unprecedented credit guarantees and the ECB is eagerly buying corporate bonds. Nonetheless, corporate insolvencies will rise as a result of the deep recession. Because the government has temporarily waived the obligation to file for bankruptcy, insolvency numbers have continued to fall until now but this may change soon. Rising loan losses will have a significant impact on German banks which are already exhausted by years of zero interest rates and low structural growth. With loan loss provisions possibly tripling, the banking industry will probably record a net loss this year. [more]
November 2, 2020
Region:
4
Q3 GDP surprise: A rear mirror view – but obstacles right in front. With the partial lockdown during November, the economy will almost certainly see another negative quarter, even in an optimistic scenario where restrictions succeed in squashing new infections and will be completely abolished by the end of November. Prepare the German healthcare sector for regional bottlenecks – protect risk groups better: The number of patients in intensive care and hospital capacity is just as important as the number of new infections. We estimate that 400,000 acutely infected patients are the limit for intensive care units. (Also in this issue: inflation outlook, German labour market, corporate insolvencies, German auto industry, global construction industry, German corona policy, open borders in the EU) [more]
October 8, 2020
Region:
5
After the summer break new cases have picked up strongly in most of Germany’s neighboring countries. In many cases (France, Spain, UK, Netherlands, Poland, Czech Republic), numbers are (by far) exceeding the peaks reported in spring or are back at these levels (Belgium, Austria). Various governments have introduced new measures, such as Paris shutting down parts of the hospitality and leisure sector, and Spain ordering a partial lockdown in Madrid, albeit not as encompassing as in April. In other countries, social distancing and mask-wearing rules have been tightened or are being discussed. [more]
October 2, 2020
Region:
6
The sizeable fiscal gaps in 2020/21 caused by the corona pandemic – which, just at the federal government level, are reflected in record new borrowing of around EUR 218 bn and EUR 96 bn, respectively – are a harsh setback for ensuring long-term public debt sustainability. In this week’s debate on the federal budget Finance Minister Scholz assured that no fiscal action in response to the crisis would be more expensive than fiscal action. But for the next federal government this appraisal might also hold true – but then with respect to fiscal consolidation. [more]
September 24, 2020
Region:
7
We have lifted our GDP forecast for 2020 to -5.5% and see the economy expanding by 4.5% in 2021. An important factor is that the rebound during Q2 – when GDP contracted by 9.7% – turned out more dynamic than expected. The momentum carried over into July. Even with some likely short-term moderation in August, we now expect Q3 GDP to increase by 6.0% qoq. Together with a 2.5% expansion in Q4, this should result in an annual GDP drop of “only” 5.5%, compared to the 9% expected in early May at the height of the pandemic in Europe. The higher carry-over lifts our 2021 GDP growth forecast to 4.5%, despite somewhat weaker momentum in H1 than expected earlier. (Also in this issue: labour market, bilateral exports, fiscal outlook 2020-22, German industry, the race for CDU leadership, and federal election prospects.) [more]
September 23, 2020
Region:
8
The two August mass demonstrations against the corona measures in Berlin attracted wide media attention and rattled the public. Many felt confirmed in their feeling that the corona crisis is driving society further apart. Current surveys, however, show that 80% of Germans firmly support the government and trust in government is at a record high. Rather, the protests go beyond the corona crisis, which might be a door opener for general system criticism. The causes for criticism and uncertainty are more likely ongoing long-term trends such as the loss of western supremacy, demographic change, climate change or digitalisation. [more]
September 9, 2020
Region:
9
The corona crisis has forced many employees to work from home. A consensus seems to be emerging that this is becoming the new normal. Many companies have already offered their employees the option to work from home for several days per week, even post-COVID. An enforceable right for employees to work from home would imply that employers must compensate employees for the additional living space required for home offices. In this paper we analyse the long-term implications of such legislation. We find serious side effects, in particular for the real estate market and the labour market. [more]
August 13, 2020
Region:
10
The impact of the coronavirus pandemic on growth in the second quarter was dramatic, no doubt about it. But economic data, as well as the daily and weekly real-time indicators that are now being watched meticulously, show that most countries began to reemerge from the slump back in May. In Germany, production was down by “just” 11.5% year over year in June, after a drop of nearly 25% in April. [more]
August 10, 2020
Region:
11
Monthly data point to a strong pickup in economic momentum during the course of Q2, in part due to catch-up effects. Still, after the unprecedented 10.1% GDP contraction in Q2 we expect a 5% increase in Q3 followed by a 2% rise in Q4 (consensus: 5.2% and 2.4%). We now expect German GDP to contract by 6.4% (compared with -9% predicted in early May) followed by a 4% increase in 2021. Still, the pre-COVID output level will not be reached before mid-2022. The current exceptional volatility in monthly data and the further development of the global pandemic imply that the error margins remain exceptionally high. (Also in this issue: Merkel’s strength might become a burden for her potential successors.) [more]
July 20, 2020
Region:
12
The German export sector has had to cope with numerous challenges over the last few years. These include “homemade” problems, above all in the auto industry, but also the shift in US trade policy. Climate change has become an increasingly important issue, too; in fact, it implies massive changes. That is why the long-term trend in many manufacturing sectors appeared unclear even ahead of the coronavirus pandemic. Now, COVID-19 has compounded already existing uncertainties. From our vantage point, a number of reasons support our hypothesis that continental value chains are likely to gain importance. [more]
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