Focus topic Germany

Focus topic: GermanyGermany has recovered well from the global financial and economic crisis. Achieving sustainable growth, however, will require further improvements to the macroeconomic framework. This is a job for policymakers, businesspeople and the public alike. DB Research’s contribution will be to analyse the broad spectrum of issues, discussing possible solutions as well as the economic and political outlook. These range from assessments of economic-policy decisions and analyses of cyclical activity and sector trends right through to the effects of international developments on Germany as a business location.

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Germany’s fiscal position – too good to last
Abstract: At a time when there are increasing voices demanding a more flexible interpretation of the Maastricht deficit rules, German Minister of Finance Wolfgang Schäuble has presented his budget plan, which does without any new federal debt between 2015 and 2018. This comes much to the chagrin of France, where his colleague Michel Sapin has been forced to admit that this year’s deficit will be at least 4.3% of GDP and that meeting the 3% target needs to be postponed for the third time until 2017 at the earliest.
Topics: Business cycle; EMU; Fiscal policy; Germany; Key issues
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Focus Germany: Ice bucket challenge and structural investment gap
Abstract: 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.
Topics: Business cycle; Capital markets; Capital markets policy; Cities; Commercial real estate; Economic growth; Germany; Intern. relations; Key issues; Macroeconomics; Monetary policy; Prices, inflation; Real econ. trends; Real estate; Residential real estate; Trade
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Rail transport: Investment in the network is required to further boost competition
Abstract: The opening of the rail transport market has helped to significantly boost the share of non-federally owned railways in regional passenger transport (2013: 26.4%) and freight transport (33.2%). Performance in these two segments has increased in recent years, too. The factors necessary to enable a continuation of this trend are higher investment in rail infrastructure and dependably predictable grants for regional transport.
Topics: Economic policy; Germany; Key issues; Other sectors; Sectors / commodities; Transport; Transport policy
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Scope for strengthening smartphone ties: 1 in 4 users also surfs at night
Topics: E-commerce; Electrical engineering; Germany; Information technology; Internet; Key issues; Media/PR & Advertising; Other sectors; Sectors / commodities; Social values / Consumer behaviour; Technology and innovation; Telecommunication
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Progress needs broadband: Private investment requires more government stimuli
Abstract: 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.
Topics: Economic growth; Germany; Information technology; Innovation; Internet; Key issues; Media/PR & Advertising; Other sectors; Privatisation/liberalisation; Sectors / commodities; Social values / Consumer behaviour; Technology and innovation; Telecommunication
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German industry: Economic engine sputters but does not stall
Abstract: Following the disappointing performance of German industry in Q2 2014, we have revised our production forecast for the year 2014 from +4% to +2.5%. Despite the current geopolitical risks we see no general change in the trend but rather a temporary dip. In the chemicals industry, mechanical engineering and the metal industry we have corrected our forecast downwards – in some cases markedly.
Topics: Auto industry; Business cycle; Chemicals industry; Economic growth; Electrical engineering; Food and beverages; Germany; Key issues; Macroeconomics; Mechanical engineering; Sectors / commodities; Steel industry
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German GDP growth: Only 1 ½% after all
Abstract: People say that life is easier for optimists. However, this has not held true for forecasters of German economic growth for quite a while now. The good start into the year (Q1: +0.8 qoq) and the upbeat business and consumer sentiment back then had induced us in June to boost our full-year forecast from 1.5% to 1.8%. Nonetheless, we didn't relinquish our place at the lower end of the consensus, which in the meantime had climbed to 2%. If only we had kept our mouths shut!
Topics: Business cycle; Economic growth; Germany; Macroeconomics
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Focus Germany: Weaker recovery in H2
Abstract: Economic growth probably suffered a worse setback in Q2 than initially presumed. We only expect stagnation now, but would no longer rule out a minimal decline. All in all, global economic conditions do not point to dynamic growth in H2. In particular, the tougher sanctions on Russia and the risk of further escalation of the conflict are set to weigh on business sentiment and investment activity in spite of Russia's low share in German exports. The debate triggered by ECB and Bundesbank comments about higher wage increases in Germany is likely to have a similar impact, even though the substance of the statements is less spectacular, on closer inspection, than the media hype. As uncertainties abound we have decided to refrain for now from making a downward revision to our full-year forecast of 1.8% GDP growth.
Topics: Business cycle; Capital markets; Economic growth; Economic policy; Germany; Key issues; Macroeconomics; Monetary policy; Prices, inflation; Real econ. trends; Sectors / commodities
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Temporary immigration boom: A wake-up call for politicians?
Abstract: Germany has become the No. 1 destination country for migrants in Europe again and No. 2 in the whole OECD after the United States. The turnaround reflects the crisis in the EMU periphery as well as the (postponed) opening of the German labour market to citizens from the 10 Central and Eastern European countries that joined the EU in 2004 and 2007. The higher immigration should only temporarily obscure the negative effects from the introduction of a minimum wage and the retirement wave triggered by the "pension at 63" option. Given the economic recovery in the eurozone periphery the present migration surge is unlikely to last and ageing Germany’s demand for labour from outside the EU will increase. Therefore, Germany needs to shape up to encourage more pull-based immigration. This requires a skills-oriented migration policy as well as more flexibility in the labour market and at the company level.
Topics: Demographics; Economic growth; Education; Germany; Key issues; Labour market; Labour market policy; Macroeconomics; Socio-econ. trends
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Germany: Above trend, but no price pressure
Abstract: Germany should enjoy the strongest growth among EMU countries, courtesy of a healthy domestic economy. Despite too-low interest rates and a tight labour market, there are no signs of imbalances building up, except maybe residential property markets in some urban centres.
Topics: Business cycle; Germany; Key issues; Macroeconomics; Prices, inflation
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