1. Research
  2. Products & Topics
  3. Periodicals
  4. Focus Germany
July 2, 2018
Region:
The month of June was marked by various political irritations which of course also had a certain impact on economies and markets. The US-EU trade conflicts seems set to broaden beyond steel and aluminium. The threat of imposing tariffs on US car imports will be felt particularly in the export-driven German car industry which already has to deal with stricter regulations and a cyclical slowdown in important export markets. On the domestic front, the German retail sector is facing ongoing structural change due to digitalisation. The German government crisis between the CDU and the Bavarian CSU over the course of the asylum policy is still not settled despite the rather constructive outcome of the EU summit. The various party bodies will convene and later on Monday there will be another meeting between Chancellor Merkel and Interior Minister Seehofer. In view of the factors weighing on economic sentiment, we consider our recent adjustment of our annual GDP growth forecast from 2.3% to 2% to be justified. [more]
Focus Germany German auto industry: Intensifying trade policy, cyclical and regulation problems. The German auto industry is faced with a number of challenges: US trade policy, the consequences of the Brexit decision, a cyclical slowdown in many car markets, the impact of the still unresolved diesel scandal and delivery delays caused by the new WLTP test. Each of these problems is quite serious on its own. But since the overall economic environment is still quite favourable, they will probably not be sufficient to generate a “perfect storm”. Nevertheless, the clouds on the horizon are darkening, and the sector is already experiencing a slowdown. In fact, the number of cars produced in Germany is likely to decline in 2018. The production index, which also includes qualitative elements, points to growth of roughly 1%. Since the auto industry is an important customer of other industrial and services sectors, the economy as a whole would inevitably suffer if one or more of the problems mentioned above escalated. Developments in the auto industry are therefore particularly relevant for economists right now. Retail trade to remain stable, despite several challenges . Retail sales remain resilient despite the economic slowdown. Digitalisation and new business models create pressure on traditional retail traders. Size matters if a company wants to keep up with digitalisation. Franchise shops and smaller retailers in the country will have to deal with numerous challenges. Cash registers may become a thing of the past The view from Berlin: Merkel unlikely to topple over EU Council benign outcome. Asylum policy – and thus the German government crisis – topped the agenda of the EU summit. The Council conclusions addressed major topics of the asylum dispute (e.g. secondary migration) and offered a combination of European and national responses. However, CDU and CSU still diverge over the compromise and – following Interior Minister Seehofer’s offer to resign – announced to resume further talks over the day (Monday). But even if the discord between the two sister parties is not bridged and triggers a political chain reaction, we still consider snap elections a rather unlikely option. Authors Josef Auer +49 69 910-31878 josef.auer@db.com Barbara Böttcher +49 69 910-31787 barbara.boettcher@db.com Dieter Bräuninger +49 69 910-31708 dieter.braeuninger@db.com Eric Heymann +49 69 910-31730 eric.heymann@db.com Stefan Schneider +49 69 910-31790 stefan-b.schneider@db.com Editor Stefan Schneider Deutsche Bank AG Deutsche Bank Research Frankfurt am Main Germany E-mail: marketing.dbr@db.com Fax: +49 69 910-31877 www.dbresearch.com DB Research Management Stefan Schneider Content Page Forecast tables...............................................2 German auto industry: Intensifying trade policy, cyclical and regulation problems . ......3 Retail trade to remain stable, despite several challenges .....................................................7 The view from Berlin. Merkel unlikely to topple over EU Council benign outcome ....12 DB German Macro Surprise Index ..............13 Data calendar ...............................................14 Financial forecasts .......................................14 Data monitor .................................................15 July 2, 2018 On a bumpy road into summer break On a bumpy road into summer break 2 | July 2, 2018 Focus Germany Economic forecasts DX Real GDP Consumer Prices* Current Account Fiscal Balance (% growth) (% growth) (% of GDP) (% of GDP) 2017 2018F 2019F 2017 2018F 2019F 2017 2018F 2019F 2017 2018F 2019F Euroland 2.6 2.1 1.7 1.5 1.8 1.6 3.5 3.3 2.7 -0.9 -0.6 -0.6 Germany 2.2 2.0 1.8 1.8 1.6 1.8 8.0 6.8 6.4 1.2 1.2 1.0 France 2.3 1.8 1.6 1.2 1.9 1.5 -0.6 -0.4 -0.4 -2.6 -2.1 -2.8 Italy 1.5 1.3 1.0 1.3 1.2 1.5 2.9 3.1 3.2 -2.3 -1.7 -1.2 Spain 3.0 2.8 2.5 2.0 1.5 1.7 1.9 1.6 1.4 -3.1 -2.1 -1.3 Netherlands 2.9 2.5 2.5 1.3 1.3 1.8 10.5 10.2 10.1 1.1 0.5 0.4 Belgium 1.7 1.9 1.8 2.2 1.9 1.7 -0.2 -0.7 -1.0 -1.0 -1.0 -1.0 Austria 3.1 3.0 2.3 2.2 2.1 1.8 1.9 2.4 2.7 -0.7 -0.6 -0.3 Finland 2.7 2.3 2.1 0.8 1.2 1.4 0.7 0.5 0.5 -0.6 -0.3 -0.3 Greece 1.3 2.3 2.2 1.1 0.6 1.0 -0.8 -0.5 0.0 0.8 1.5 2.0 Portugal 2.7 2.2 1.7 1.6 1.0 1.5 0.7 0.4 0.2 -3.0 -1.0 -1.0 Ireland 7.8 5.4 3.3 0.3 1.0 1.3 12.5 6.0 3.0 -0.3 0.1 -0.4 UK 1.7 1.3 1.6 2.7 2.4 2.1 -3.9 -3.8 -3.5 -1.5 -1.9 -1.4 Denmark 2.3 2.0 1.9 1.1 1.5 1.6 7.8 7.5 7.0 0.9 -0.5 -0.5 Norway 2.0 2.2 2.0 1.9 1.9 1.8 5.5 6.0 5.5 4.4 4.0 5.0 Sweden 2.5 2.7 2.4 1.8 1.9 2.0 3.3 4.0 4.0 1.3 1.0 0.5 Switzerland 1.1 2.2 1.8 0.5 0.5 0.6 9.8 11.2 11.4 0.6 0.2 0.2 Czech Republic 4.6 3.4 3.1 2.5 2.1 2.2 1.0 0.6 1.1 1.6 0.8 0.6 Hungary 4.0 3.8 3.2 2.3 2.9 3.3 2.9 1.9 1.5 -2.0 -2.2 -2.3 Poland 4.6 4.2 3.4 2.0 2.0 2.8 0.3 -0.8 -1.1 -1.6 -2.0 -2.3 United States 2.3 3.0 2.8 2.1 2.6 2.1 -2.9 -3.2 -3.5 -3.4 -3.9 -4.6 Japan 1.7 0.8 0.5 0.5 0.7 0.6 4.0 4.1 4.4 -2.8 -2.6 -2.4 China 6.9 6.6 6.3 1.6 2.0 2.4 1.3 0.6 0.3 -3.7 -3.5 -3.5 World 3.8 3.9 3.9 2.9 3.2 3.2 *Consumer price data for European countries based on harmonized price indices except for Germany. This can lead to discrepancies compared to other DB publications. Sources: National Authorities, Deutsche Bank Forecasts: German GDP growth by components, % qoq, annual data % yoy 0 2018 2019 2016 2017 2018F 2019F Q1 Q2F Q3F Q4F Q1F Q2F Q3F Q4F Real GDP 1.9 2.2 2.0 1.8 0.3 0.5 0.5 0.5 0.4 0.4 0.4 0.4 Private consumption 2.1 1.8 1.6 1.5 0.4 0.7 0.5 0.5 0.3 0.4 0.3 0.2 Gov't expenditure 3.7 1.5 0.6 1.0 -0.5 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Fixed investment 3.1 3.3 4.0 3.5 1.7 1.3 1.0 0.8 1.0 0.9 0.9 0.8 Investment in M&E 2.2 4.0 4.5 3.0 1.2 1.0 1.0 0.5 1.0 0.7 0.7 0.5 Construction 2.7 2.8 4.7 4.9 2.1 1.8 1.2 1.2 1.2 1.2 1.2 1.2 Inventories, pp -0.2 0.2 -0.2 0.0 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 Exports 2.6 4.6 3.8 4.5 -1.0 1.2 1.2 1.2 1.1 1.0 1.0 1.2 Imports 3.9 5.2 3.4 5.1 -1.1 1.4 1.4 1.4 1.2 1.2 1.1 1.2 Net exports, pp -0.3 0.1 0.4 0.0 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.1 Consumer prices* 0.5 1.8 1.6 1.8 Unemployment rate, % 6.1 5.7 5.2 4.9 Industrial production 1.4 3.0 1.8 1.5 Budget balance, % GDP 1.0 1.2 1.2 1.0 Public debt, % GDP 68.2 64.1 60.3 57.0 Balance on current account, % GDP 8.5 8.0 6.8 6.4 Balance on current account, EUR bn 268.8 262.5 229 225 *Inflation data for Germany based on national definition. This can lead to discrepancies to other DB publications. Sources: Federal Statistical Office, German Bundesbank, Federal Employment Agency, Deutsche Bank Research On a bumpy road into summer break 3 | July 2, 2018 Focus Germany German auto industry: Intensifying trade policy, cyclical and regulation problems — The German auto industry is faced with a number of challenges: US trade policy, the consequences of the Brexit decision, a cyclical slowdown in many car markets, the impact of the still unresolved diesel scandal and delivery delays caused by the new WLTP test. — Each of these problems is quite serious on its own. But since the overall economic environment is still quite favourable, they will probably not be sufficient to generate a “perfect storm”. Nevertheless, the clouds on the horizon are darkening, and the sector is already experiencing a slowdown. In fact, the number of cars produced in Germany is likely to decline in 2018. The production index, which also includes qualitative elements, points to growth of roughly 1%. — Since the auto industry is an important customer of other industrial and services sectors, the economy as a whole would inevitably suffer if one or more of the problems mentioned above were to escalate. Developments in the auto industry are therefore particularly relevant for economists right now. On average, German car producers released quite encouraging economic figures in the last few quarters; in fact, they managed to increase their sales in many important markets around the world. The sector is, indeed, quite competitive at the global level. This may astonish some of our readers, particularly in Germany. While the auto industry has recently done well, it has generated numerous negative headlines in the last few years, and these headlines often dominated public perception. And indeed, not all is well in the sector. In fact, trade policy, cyclical and regulatory developments are increasingly giving cause for concern, and to some extent, the sector itself has created its own problems. This may have an impact on Germany’s economy as a whole. US more likely to introduce import tariffs on cars In the last few weeks and months, US President Trump has repeatedly threatened to introduce higher tariffs on imported cars, for example from Europe or China. Right now, it seems unlikely that Trump might be willing to take a calm look at the transatlantic trade relationships as a whole, i.e. including not only the goods, but also the services and primary and secondary income balances. Across all segments of the current-account balance, the US generated a surplus over the EU in 2017 1 . It is therefore (unfortunately) useless to discuss whether higher import tariffs would help or harm US interests in the medium term or to analyse how convincing the US government’s arguments are. All in all, tariffs have undoubtedly become more probable. Thus, it makes sense to think about a “what-if” scenario. Germany would be hit hard by import tariffs on cars. In 2017, 12.2% of the sector’s total exports went to the US, which was the most important export market for the German auto industry. The US exports were worth EUR 28.6 bn. The US remained the top market even though German car exports to the US were down by an aggregate 16% in nominal terms in 2016 and 2017. Ceteris paribus, higher US import tariffs would certainly weigh on German car exports. However, the potential impact can only be gauged, particularly since second-round effects and exchange-rate effects will influence trade volumes as 1 See Felbermayr, Gabriel (2018). Beobachtungen zur US-Leistungsbilanz. In: ifo Schnelldienst 9/2018. Munich. 0 10 20 30 US UK CN FR IT ES BE AT PL NL US are the most important export market for the German auto industry 1 German auto exports by export markets, 2017, EUR bn Source: Federal Statistical Office On a bumpy road into summer break 4 | July 2, 2018 Focus Germany well. Tariffs of 20% (this level was mentioned recently) would of course not cause German car exports to the US to drop by the same amount. The price elasticity of demand is relatively low in the case of premium cars. Nevertheless, such a tariff might shave off a low to middle single-digit billion amount from car exports to the US. Moreover, earnings per car could decline if carmakers decided not to add the full amount of the tariffs to the final US sales price. While the German auto industry might shift a larger share of their production to the US as a response, doing so will take time. The German car industry would also suffer from higher US tariffs on imports from China. Trump has already said that he might levy tariffs on Chinese imports, too. If he did, China would probably respond in kind, and this would make exports of German-made cars from the US to China more expensive. Brexit is leaving its traces Negotiations about how the Brexit decision is to be implemented are dragging along. Brexit-related discussions and uncertainties and the depreciation of sterling versus the euro have already had an impact on German car exports to the UK. In both 2016 (-6.6% in nominal terms) and 2017 (-8.3%), car exports to the UK declined markedly. The downtrend stopped in the first four months of 2018; in fact, exports were up by almost 1% year-on-year. Nevertheless, the UK business will likely remain a challenge for the German auto industry for months and years to come. This applies both to exports from Germany and investments by German companies in local factories. The UK business is important for the German auto industry because the country was the second most important foreign market in 2017; its share in the sector’s total exports amounted to 10.6%, down from 12.8% in 2015. Cyclical slowdown in important markets Quite apart from trade-policy-related problems in the two most important export markets, the US and the UK, sentiment in the sector is dampened by the deteriorating economic outlook in important car markets. Light vehicles (passenger car and light trucks) sales in the US already declined by almost 2% in 2017, if from a high level. In the first five months of 2018, sales were up “only” 1.2% yoy. Ultimately, US car sales have reached a level which makes it difficult to achieve further strong growth rates, even though the overall US economy is doing well. We believe that the situation will remain unchanged in 2019. At the same time, US demand is shifting from passenger cars towards light trucks. German carmakers are not as well positioned as their US competitors in this segment. Back in 2012, the share of passenger cars in total US vehicle sales had been more than 50%. It dropped to 35.6% in 2017 and continued to decline at the beginning of 2018. In Western Europe, too, the scope for further growth has narrowed after relatively strong new registration figures in the last few years. In 2018 new car registrations in the EU-15 were up 1.5% year-on-year (2017 as a whole: +2.6%; 2016: +6%). In 2019, their number will probably increase by less than 1%. This slowdown in Western Europe is particularly important for the auto sector in Germany because a large share of the cars produced in Germany is sold on the European markets. 0 10 20 30 40 08 09 10 11 12 13 14 15 16 17 Exports Imports Source: Federal Statistical Office German auto exports to the US have recently declined 2 German foreign trade with automotive products with the US, EUR bn 0 10 20 30 08 09 10 11 12 13 14 15 16 17 Exports Imports Source: Federal Statistical Office German foreign trade with automotive products with the UK, EUR bn Brexit dampens trade with UK 3 0 3 6 9 12 15 18 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Light vehicles Passenger cars Light trucks US light vehicle sales, m Light trucks becoming more popular 4 Source: Bureau of Economic Analysis On a bumpy road into summer break 5 | July 2, 2018 Focus Germany In China, too, car sales are no longer growing at two-digit rates. The largest car market world-wide is in for lower momentum, even though sales figures will remain high in absolute terms. Moreover, German carmakers meet local demand to a significant extent from local factories. China is by far the most important foreign production site for German carmakers. During the current year, auto exports to China gave important impulses. During the first four months of the year, they were up by almost 25% year-on-year. Overall, we do not expect a (significant) decline in car demand in either of the important markets. However, growth will slow down considerably, and this will dampen production in Germany. This fits in with the fact that the expectations of the sector regarding its export business stand in negative territory of late. With the share of exports in total sales coming to 64%, the cyclical risks are evident. No end to the diesel scandal The diesel scandal is still not over. As the auto industry is charged with new offences, the political debate about the advantages and disadvantages of hardware patches for older diesel cars is continuing and further (regional) driving bans are being discussed, the market share of diesel cars has declined considerably. Between January and May 2018, only 32% of all new passenger car registrations in Germany were for diesel engines, down from 48% in 2015. The diesel share in the EU is likely to drop below 40% this year for the first time since 2001. This is a problem for the auto industry because diesel cars tend to the more expensive than their petrol-fuelled counterparts, which is why the shift in consumer preferences will ceteris paribus result in sales losses. And what is more, if the diesel share declines, the car industry will find it more difficult to comply with the carbon emissions limits for cars from 2020/2021. Since diesel engines consume less fuel, their carbon emissions per km are below those of petrol engines. At the same time, alternative fuels (e.g. e-mobility) are still only a niche phenomenon, and many buyers prefer cars with stronger engines. If these trends do not change, compliance with the carbon emissions limits will be at risk and this, in turn, will result in fines. Moreover, environmental regulations for diesel cars may be tightened further due to the experience of the recent past (e.g. higher taxes on diesel fuel). The sector is investing billions of euros in energy-efficient and low-emission engines as well as in e-mobility and other alternative fuels. Ultimately, however, everything comes down to customer preferences. While demand for e-cars looks set to rise considerably in the coming years, profits per car sold will initially decline, not least because there are no sufficient scale effects in e-car production at the moment and batteries are still expensive (even though they are getting cheaper). New WLTP examination procedure: Production of certain models will be interrupted Another regulatory challenge will lead to higher expenses in the car sector in the coming months and might even result in (temporary) production interruptions. From September 2018, all new cars will need to be certified under the Worldwide Harmonized Light Vehicles Test Procedure (WLTP) before being admitted to registration. Since this applies also to different versions of a model (e.g. different engines or features) and the time until the introduction of the WLTP was relatively short, all test centres are running at full capacity and there are certification delays. Several carmakers have therefore announced that they will (temporarily) stop selling certain models. This is less important if models are 50 60 70 80 90 100 110 120 00 02 04 06 08 10 12 14 16 DE FR IT ES UK New passenger car registrations, 2000=100 Source: ACEA New passenger car registrations: No clear trend 5 10 11 12 13 14 15 00 02 04 06 08 10 12 14 16 18* Slower growth 6 New passenger car registrations, EU-15, m * Forecast Sources: ACEA, Deutsche Bank Research 0 5 10 15 20 25 30 06 08 10 12 14 16 18* Moderate growth on the Chinese market 7 Passenger car sales in China, m * Forecast Sources: CAAM, Deutsche Bank Research On a bumpy road into summer break 6 | July 2, 2018 Focus Germany near the end of their lifecycle anyway; however, it may be a major problem in the case of younger models, which have not been certified for capacity reasons. Customers might simply buy their car later if they have set their heart on a model which cannot be delivered right now and if they are not under time pressure. This might temporarily reduce capacity utilisation at the carmakers. However, domestic production might suffer if customers with low brand loyalty turn to cars by foreign makers if the certification procedure for these models is already complete. The impact on German car production would be relatively small if buyers simply chose a similar model by the same maker instead of waiting for later delivery. All in all, the WLTP certification will probably be more of a burden on producers’ expenses than on domestic car production. A major German producer recently put out a profit warning amongst others due to certification problems. Not a “perfect storm”, but dark clouds on the horizon Each of the trade policy, cyclical and regulatory problems mentioned above is serious, and the German auto industry will have to deal with them all. But with the economic framework conditions favourable (we expect global demand for cars to rise slightly, by c. 2%, in 2018), the problems are probably not serious enough to generate the “perfect storm”. However, dark clouds are certainly gathering in the sky. An output increase of more than 1% this year is unlikely (as measured by the production index, which also includes qualitative improvements). The number of cars produced will probably decline in 2018. If individual problems, such as the trade conflict, escalated, the negative impact on domestic car production would, of course, become even more serious. Negative effects on other sectors are inevitable With a share of roughly 20% in gross manufacturing value added, the German car industry is the most important industrial sector and an important customer of other industrial and services sectors. A look at the input-output calculation for Germany explains this importance. Mechanical engineering, electrical equipment producers, the metals sector, the rubber and plastics industry, glass and glass-related products manufacturers and the textile industry are only some of the sectors which deliver a large share of their products to the auto industry. Wholesale trade, advertising, technical and economic consulting, transport and logistics and the temp agency sector are services sectors which are highly dependent on the auto industry. In addition, the auto industry commissions large external research projects. This list shows that a slowdown in the auto industry will necessarily have a negative impact on other sectors. This might result in lower GDP growth, as the auto industry is closely linked, both directly and indirectly, to other sectors. The years 2008/2009 are still present in the memories of many managers in the sectors mentioned above. Back then, automotive production index declined by an aggregate 25% and caused a major crisis in other sectors. That is why developments in the auto industry are particularly relevant for economists right now. Eric Heymann (+49 69 910-31730, eric.heymann@db.com) 20 30 40 50 60 00 02 04 06 08 10 12 14 16 EU-15 DE Source: ACEA Share of diesel engines is declining 8 Share of diesel engines in all new passenger car registrations, % 70 80 90 100 110 120 10 11 12 13 14 15 16 17 18 Output Orders Source: Federal Statistical Office German auto industry: 2018 lower growth than 2017 9 Automotive industry in Germany, 2015=100, sa, moving average lag 3 19.6 15.2 12.8 12 7.4 33 Automotive Mech. eng. Elect. eng. Metal industry Chemicals Others Automotive industry biggest industrial in Germany 10 Share of industrial sectors in gross value added of total manufacturing industry, 2015, % Source: Federal Statistical Office On a bumpy road into summer break 7 | July 2, 2018 Focus Germany Retail trade to remain stable, despite several challenges — The retail sales remain resilient despite the economic slowdown. Digitalisation and new business models create pressure on traditional retail traders. — Size matters if a company wants to keep up with digitalisation. Franchise shops and smaller retailers in the country will have to deal with numerous challenges. Cash registers may become a thing of the past. As the domestic economy is still humming along, German retail trade will continue to benefit from favourable framework conditions both this year and next. Rising employment and unexpectedly high wage agreements reflect the good labour market situation. And higher incomes support private consumption. Overall, German retail sales (excluding vehicles) will probably rise again by 2.5% in each of the years 2018 and 2019. This will be the ninth and tenth increases in a row. In price-adjusted terms, however, this is equivalent to an annual increase of only 1%. The rise in retail sales may be impressive in real terms, but since households spend ever larger shares of their income on travelling and services which are not included in the typical retail sales basket, retail sales are actually growing more slowly than household consumption as a whole. Domestic policy, economic and geopolitical tensions may be a risk to our forecast. These developments have already caused consumer sentiment to deteriorate slightly by mid-2018, despite strong wage growth. However, the German Retail Federation (Handelsverband Deutschland, HDE) does not believe that a turnaround is imminent. 2 While the GfK income expectations were recently down considerably in year-on-year terms, they have stabilised at a healthy level in the last few months. Several retail segments will probably do quite well over the forecast horizon. Bike shops, for example, should benefit from consumers’ growing interest in high-performance e-bikes. The football World Cup should boost sports gear and food sales less than was anticipated before Germany was out of tournament. And as incomes rise, people tend to make more expensive purchases, for example of consumer electronics or electronic household appliances. Despite the recent monthly decline in the propensity to buy, the index remains at a high level in a rolling 3-month comparison. It remains to be seen whether furniture sellers will benefit from the uptrend in construction in the future; numerous home builders focus on financing their house or flat first and buy furniture later (apart from the kitchen). Moreover, the ageing of the population will lead to lower furniture sales overall. Distance and online retailing should continue to do well. Sales of books, shoes and clocks, however, look set to underperform. Retail trade is one of the most adaptable sectors of the economy. Retailers regularly have to deal with challenges such as short lifecycles of certain consumer goods or fashions, jewellery or sports gear or disruptive innovations such as new entertainment or mobile gadgets. Nevertheless, digitalisation and all its aspects are a bigger challenge to retail traders than any other megatrend before. Let us look at two examples: 2 See HDE/HB. Konsumbarometer. June 2018. P. 11-13. -4 -3 -2 -1 0 1 2 3 4 5 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Retail sales (ex cars) Private consumption Private consumption and retail sales 1 Sources: Federal Statistical Office, Deutsche Bank Research Real, % yoy, sa -1.0 0.0 1.0 2.0 3.0 4.0 5.0 -1.5 -0.5 0.5 1.5 2.5 12 13 14 15 16 17 18 EC consumer climate GfK consumer climate Retail sales Retail sa les and consumer sentiment 2 Sources: Destatis, European Commission, GfK, Deutsche Bank Research Consumer climate, normalized (left); % yoy, 3M ma, sa (right) On a bumpy road into summer break 8 | July 2, 2018 Focus Germany — First, digitalisation will extend to shops’ payment procedures, which will probably be thoroughly revolutionised. — Second, digitalisation will not necessarily make traditional retailers obsolete; rather, updated marketing and business models should allow retailers to prosper and develop dynamically in the new, digitalised world. IoT shelves will put an end to queuing in the supermarket, accelerate information flows and collect valuable user and consumer data German consumers still have to pay in the traditional way, i.e. at the cash register. Cash and card payments take a similar amount of time, and queuing in the supermarket is a source of stress. However, innovative technologies such as contactless cards or mobile phone apps will enable retailers to fulfil customers’ changing needs and demands. The new technologies have advantages for both sides. Retailers can process a larger number of payments, not least because they no longer need to take the time to count and register payments of small sums, and as customer satisfaction increases, customer numbers should rise over time. For customers, contactless and simple cash-free payment solutions are more comfortable, take less time and are more hygienic. 3 Check-out and payment procedures might become even simpler in the future as retailers furnish their shops with Internet-of-things (IoT) shelves. From the retailers’ vantage point, these shelves have several advantages. They can identify potential customers, register which goods they take or put back, and automatically determine the value of customers’ shopping carts. Retailers can monitor their inventories in real time and quickly order additional goods. The number of traditional cash registers will decline, as only a few of them will remain to cater for more conservative customers who are less willing to accept innovation. In Germany and Europe, the General Data Protection Regulation, which entered into force by the end of May 2018, will probably slow down the introduction of such innovations. However, a look at past complex and fundamental challenges shows that, in all probability, a solution for the protection of personal data will be found. Customers would certainly benefit from face-recognising or biometrics- based technologies for shopping; they would be able to do completely without cash, cards or smartphones. Modern IoT shelves only need to analyse a face’s vector structure to identify the customer and process the data. In view of the particular sensitivities of German/European customers and courts, there is a risk that domestic IT companies may develop the new technologies and make them marketable, only to see them used in regions/countries where personal data protection concerns are less of an issue. This applies in particular to Asian countries, where people are much more open to IT solutions. Densely populated China, which already has a modern e-commerce network, may adopt such innovations, too, particularly since the country hopes to be a technology leader in many other economic areas by 2025. While the GDPR may slow down adoption of these technologies in the short term, its security standards may become the norm in the medium to longer term. Then, Europe might be at an advantage. 3 For details see HDE/girocard. Kontaktlose Zahlungen akzeptieren. Eine Anleitung für Händler. 29.12.2017 . 0 5 10 15 20 25 30 35 40 45 50 0 10 20 30 40 50 60 00 02 04 06 08 10 12 14 16 18 % yoy Online sales ex value added tax, (lhs) Online sales in % yoy, (rhs) Online sales in Germany expand further 3 bn Euro Sources: Federal Statistical Office, HDE On a bumpy road into summer break 9 | July 2, 2018 Focus Germany Multichannel retailers have a good chance to prosper, despite the rise of e-commerce, digital challenges and competition by “big techs” For years now, online retail sales have been expanding at a considerably higher rate than their traditional counterparts. In 2018, too, online sales look set to rise by 10%, i.e. much more strongly than stationary sales. E-commerce obviously makes a major contribution to overall nominal retail sales growth. Digitalisation opens up numerous new supply, availability and selling opportunities, which simply did not exist in the early years of long-distance retailing. Rapid and persistent e-commerce growth attracts not only traditional retailers. New, innovative entrepreneurs have become interested in online retailing, too. Amazon would not have been able to become a global retail giant if its management had not pursued its vision. And more intense competition from Amazon (a development which is becoming evident in Germany, too) was only the beginning. Other major internet companies have identified e-commerce as a growth market as well in the last few years, and they are trying to get a foothold in the new retail space and expand in this area. While not all large internet companies are trying to enter the German e- commerce market at once, one should not have any illusions about their plans. Google, for example, has bought shares in JD.com in order to get a foothold in China and signed a partnership agreement with Carrefour, a large French supermarket chain, in order to expand its business in France. This is indicative of a general trend in retailing, which will probably result in new and increased online competition in Germany as well. As internet giants enter into targeted partnerships with local companies, they get access to their user data on the local markets. And these may form the basis for a future expansion strategy. After all, the data can help to optimise delivery chains, round off the range of products or align marketing initiatives with customer preferences. The HDE survey 4 finds that larger companies are better at gauging developments in retail trade than small retailers. Moreover, a majority of multichannel retailers (57%), which have focused on expanding their online business in addition to their stationary business in the last few years, expect their business to grow in 2018. Both trends, the one towards bigger companies and the one towards multichannel retailing, are likely to continue. Size matters in the digital world In important industrial sectors, such as mechanical engineering, smaller companies have good survival and growth chances thanks to their adaptability and flexibility. In retail trade, however, the trend has been going in the opposite direction for decades now. While cost and efficiency aspects were the main drivers of structural adjustments in the past, digitalisation has taken over that role now. Companies can only exploit the new digital opportunities if they are sufficiently large and have the necessary cash for investments. Smaller retailers, particularly in less densely populated areas, have been struggling for years and will be hard pressed to deal with the challenge of digitalisation. New online retailers, who commission public or private service providers to have their goods delivered to rural areas, turn up as competitors. Digitalisation may also become an investment trap for smaller franchise companies in larger shopping centres near agglomerations if consumers no longer visit these shopping centres because digital alternatives appear more attractive. Moreover, franchise shops need to deal with the sector-specific risk 4 See HDE. Lage und Perspektiven im Einzelhandel. April 2018. S. 2/3. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Retail sector in total Multichannel Expansion Stagnation Contraction Multichannel more optimistic than retail sector in total 4 Sources: HDE, Konjunkturumfrage 2018, Spring Share of companies -10 10 30 50 Average <5 5 to 10 11 to 20 21 to 100 >100 Sales expectations increase with company size 5 Balance % - pp of "Increase" and "Decrease" Sources: HDE, Konjunkturumfrage 2018, Spring On a bumpy road into summer break 10 | July 2, 2018 Focus Germany that the ununderlying consumption/product trend may turn out to be a hype and quickly become obsolete. At the same time, digitalisation may generate new product ideas and franchise systems and thus lead to new investments. Multichannel retailing as an intelligent answer to digital risks While the trend towards larger retail companies has been in place for decades, the trend towards multichannel retailing is relatively recent and closely linked to the increasing digitalisation of all economic and trade sectors. It is a response to the fact that competition from global internet giants such as Amazon is likely to intensify. A company such as Zalando, which needed only a decade to transform from a normal internet shoe retailer into a multi-model supplier with platform access for brand producers, shows just what has become possible. Traditional retailers must recognise that digitalisation is not only a source of risks, but also of opportunities. It offers ways to better meet changing customer desires. The success of multichannel supermarkets, which offer their customers new shopping experiences, flexibility and a larger range of varieties, shows that updated traditional retail concepts offer good chances of survival. In the future, traditional retailers will use customer data more actively. Smart shops will use a range of techniques in order to determine customers’ needs and create incentives to buy. In the near future, intelligent cameras will observe customers in the shop and provide customised adverts at the shelves. More- over, intelligent product labels which can communicate will allow for dynamic price changes: in the morning, they will attract bargain hunters, and near closing time, they will try and sell fresh produce. Digitalisation and online trade will play a more important role in the future and be useful for many customer groups, even beyond purely material considerations. For example, senior citizens can comfortably shop online and thus save effort, time and life energy. Meal suppliers can extend their range by also offering retail goods. And people who suffer from diabetes or allergies can benefit from additional information on foodstuffs, such as the sugar or gluten content. 0% 20% 40% 60% 80% 100% Offline Online Fashion & accessoires Jewellery & watches Consumer electronics Do-it-yourself & garden Living & furnishing Office & stationery Leisure & hobby FMCG Health & wellness Other Offline short lived consumer goods dominate, online fashion and consumer electronics are in demand 6 Source: HDE, Online Monitor 2018 2017, share of product categories On a bumpy road into summer break 11 | July 2, 2018 Focus Germany Conclusion: Retail trade is in for a challenge, but should be able to manage Demographic developments will certainly dampen German retail trade in the medium term. In addition, digitalisation-related challenges are increasing. But if retail traders rely on their ability to adapt and exploit the benefits of digitalisation, they should be able to manage, despite intensified competition from internet giants such as Amazon. Josef Auer (+49 69 910-31878, josef.auer@db.com) On a bumpy road into summer break 12 | July 2, 2018 Focus Germany The view from Berlin Merkel unlikely to topple over EU Council benign outcome Asylum policy and, as a result, the German government crisis has topped the June 28-29 EU Council’s agenda. Despite declining numbers of asylum seekers, the German CSU demands a much more restrictive EU’s policy stance incl. a stop on EU-internal migration of asylum applicants. Otherwise, CSU Home Secretary Seehofer would close the German border for those applicants who were already registered in another member state. This would have been a blow to Chancellor Merkel’s promise and ambitions to forge a European solution. The EU Council conclusions, however, addressed the major elements incl. the secondary movements of asylum seekers: “Member states should take all necessary internal legislative and administrative measures to counter such movements and to closely cooperate amongst each other to that end”. The crucial language Merkel secured should help to water down the conflict with the CSU. Given the EU-wide rather restrictive tone towards migration, Merkel was willing to accommodate the concerns to a broad extent only stopping short before turning the EU into a “fortress Europe”. The SPD is backing Merkel's preference for a European response to this international issue in principle. Over the weekend, CDU and CSU grandees – in separate meetings – assessed the outcome in the light of their positioning. While the CDU backed Merkel’s view of the achievements in Brussels, the CSU criticised the compromise as being not sufficient and insisted on the demand of unilateral measures. On late Sunday night Seehofer offered his resignation over his clash with Merkel but then announced further talks and meetings for today. Thus, the situation is still fluid with a lot of political noise and uncertainty. Austria has announced that it will focus on migration policy during its EU presidency in H2/2018. A report on the progress on the outstanding issues (i.e. overhaul of the Dublin regulation) will be presented to the EU Council in October, thus keeping the political pressure up. As these questions are usually dealt with by the EU’s interior ministers, Home Secretary Seehofer could be prominently involved in further talks, providing him a stage to position himself in Brussels, Berlin and Munich should he decide to stay. The German public’s attitude is somewhat ambiguous. While 62% support Seehofer’s call to close the German border for registered asylum applicants, 69% would welcome a compromise among the two sister parties, according to a recent survey (Infratest dimap). The lasting impact of the CDU-CSU confrontation on Merkel’s power and standing remains to be seen. As of today, two-thirds of Germans think that Merkel’s authority has suffered as a result of the bickering with Mr. Seehofer (Infratest dimap). The alternative scenario, if the fundamental dissent between the CDU and the CSU over the summit’s outcome prevails, could aggravate the government crisis. It is an open question how the CSU would react should Seehofer resign. If the CSU were to split from the CDU and walk out of the federal government it would deprive the CSU of a major channel to influence German federal politics from which the party and Bavaria have benefited a lot. Even in this option, we consider snap elections less likely. At present, neither of the relevant parties would be interested in such an event, which would primarily benefit the AfD thus shaking up the political landscape in Germany. Barbara Böttcher (+49 69 910-31787, barbara.boettcher@db.com) Dieter Bräuninger (+49 69 910-31708, dieter.braeuninger@db.com) 0 100 200 300 400 500 600 700 800 900 2014 2015 2016 2017 2018* GR IT ES** in '000 Source: UNHCR Refugees and migrants arriving by sea to major mediterranean countries 1 * January 1 to June 27; ** Spain incl. those who arrive by land 0 10 20 30 CDU/CSU SPD Greens FDP Left AfD Others Recent surveys* Federal election result % * Average of major recent surveys (Allensbach, Emnid, Forsa, Forschungsgruppe Wahlen, Infratest dimap, INSA) Major political parties' popularity & result of the past federal election 2 Source: Wahlrecht.de On a bumpy road into summer break 13 | July 2, 2018 Focus Germany DB German Macro Surprise Index The DB German Macro Surprise Index compares published economic data with market forecasts and thus provides clues as to the direction of future forecast revisions. Jochen Möbert (+49 69 910-31727, jochen.moebert@db.com) Updated by Sebastian Becker, Marc Schattenberg and Jochen Möbert (+49 69 910-31727, jochen.moebert@db.com) Source: Heiko Peters (2014). DB German Macro Surprise Index. Focus Germany, 4 August 2014. Last 20 published economic data for Germany DX Bloomberg Tickers Indicator Reporting month Publication date Current value Bloomberg consensus Surprise Standardised surprise Quantile rank GRFRIAMM Index Retail Sales (% mom) 3 2018 30/04/2018 -0.4 0.8 -1.2 -0.7 0.2 MPMIDEMA Index Markit Manufacturing PMI 4 2018 02/05/2018 58.1 58.1 0.0 0.0 0.4 MPMIDESA Index Markit Services PMI 4 2018 04/05/2018 53.0 54.1 -1.1 -1.2 0.1 GRIORTMM Index Factory Orders (% mom) 3 2018 07/05/2018 -1.1 0.5 -1.6 -0.8 0.2 GRIPIMOM Index Industrial production (% mom) 3 2018 08/05/2018 1.7 0.8 0.9 0.8 0.8 GRCAEU Index Current Account Balance (EUR bn) 3 2018 08/05/2018 29.6 27.0 2.6 0.4 0.7 GRZEWI Index ZEW Survey Expectations 5 2018 15/05/2018 -8.2 -8.2 0.0 0.0 0.6 GRZECURR Index ZEW Survey Current Situation 5 2018 15/05/2018 87.4 85.5 1.9 0.2 0.6 GRCP20YY Index CPI (% yoy) 4 2018 16/05/2018 1.6 1.6 0.0 0.2 0.3 GRGDPPGQ Index GDP (% qoq) 3 2018 24/05/2018 0.3 0.3 0.0 -0.2 0.3 GRIFPBUS Index IFO Business Climate 5 2018 25/05/2018 92.9 102.0 -9.1 -0.6 0.3 GRIMP95Y Index Import Price Index (% yoy) 4 2018 30/05/2018 0.6 0.8 -0.2 0.2 0.5 GRUECHNG Index Unemployment Change (000's mom) 5 2018 30/05/2018 -12.0 -10.0 2.0 -0.1 0.4 GRCP20YY Index CPI (% yoy) 5 2018 30/05/2018 2.2 2.2 0.0 0.2 0.3 GRFRIAMM Index Retail Sales (% mom) 4 2018 30/05/2018 2.3 0.5 1.8 1.7 0.9 MPMIDEMA Index Markit Manufacturing PMI 5 2018 01/06/2018 56.9 56.8 0.1 0.1 0.5 MPMIDESA Index Markit Services PMI 5 2018 05/06/2018 52.1 52.1 0.0 0.0 0.5 GRIORTMM Index Factory Orders (% mom) 4 2018 07/06/2018 -2.5 0.8 -3.3 -1.6 0.0 GRCAEU Index Current Account Balance (EUR bn) 4 2018 08/06/2018 22.7 20.0 2.7 0.5 0.7 GRIPIMOM Index Industrial production (% mom) 4 2018 08/06/2018 -1.0 0.3 -1.3 -1.0 0.1 Sour ces: Bloomberg Finance LP, Deut sche Bank Research -0.5 -0.4 -0.3 -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 14 15 16 17 18 DB German Macro Surprise Index +/- 1 standard deviation DB German Macro Surprise Index Average of last 20 z - scores of data surprises Values above (below) 0 indicate the data came in better (worse) than expected Sources: Bloomberg Finance LP, Deutsche Bank Research On a bumpy road into summer break 14 | July 2, 2018 Focus Germany Jochen Möbert (+49 69 910-31727, jochen.moebert@db.com) Germany: Data calendar DX Date Time Data Reporting period DB forecast Last value 5 Jul 2018 8:00 New orders manufacturing (% mom, sa) May 1.1 -2.5 6 Jul 2018 8:00 Industrial production (% mom, sa) May 1.0 -1.7 9 Jul 2018 8:00 Trade balance (EUR bn, sa) May 17.8 19.0 9 Jul 2018 8:00 Merchandise exports (% mom, sa) May -0.1 -0.3 9 Jul 2018 8:00 Merchandise imports (% mom, sa) May 0.6 2.6 24 Jul 2018 9:30 Manufacturing PMI (Flash) July 56.0 55.9 24 Jul 2018 9:30 Services PMI (Flash) July 54.4 53.9 25 Jul 2018 10:00 ifo business climate (Index, sa) July 102.0 101.8 30 Jul 2018 14:00 Consumer prices preliminary (% yoy, nsa) July 2.0 2.1 31 Jul 2018 8:00 Retail sales (% mom, sa)* June 1.0 -2.1 31 Jul 2018 9:55 Unemployment rate (%, sa) July 5.2 5.2 * An earlier data release may be possible due to the Federal Statistical Office. Sources: Deutsche Bank Research, Federal Statistical Office, Federal Employment Agency, ifo, Markit US JP EMU GB CH SE DK NO PL HU CZ Current 1.875 -0.10 0.00 0.50 -0.75 -0.50 0.05 0.50 1.50 0.26 1.00 Jun 18 1.875 -0.10 0.00 0.50 -0.75 -0.50 0.05 0.50 1.50 0.26 1.00 Sep 18 2.125 -0.10 0.00 0.75 -0.75 -0.50 0.05 0.75 1.50 0.15 1.25 Dec 18 2.375 -0.10 0.00 0.75 -0.75 -0.25 0.05 0.75 1.50 0.15 1.50 Current 2.34 0.08 -0.33 0.68 Jun 18 2.34 0.08 -0.33 0.67 Sep 18 2.48 0.05 -0.30 0.55 Dec 18 2.73 0.05 -0.30 0.75 Current 2.86 0.03 0.30 1.34 Jun 18 2.84 0.04 0.30 1.36 Sep 18 3.25 0.00 0.55 1.50 Dec 18 3.50 0.00 0.90 1.80 EUR/USD USD/JPY EUR/GBP GBP/USD EUR/CHF EUR/SEK EUR/DKK EUR/NOK EUR/PLN EUR/HUF EUR/CZK Current 1.16 111.00 0.89 1.32 1.16 10.46 7.45 9.50 4.39 329.81 26.01 Jun 18 1.17 110.45 0.89 1.31 1.16 10.45 9.51 4.36 329.77 26.02 Sep 18 1.17 105.00 0.86 1.36 1.18 9.50 9.10 4.35 318.50 25.05 Dec 18 1.20 102.00 0.85 1.41 1.20 9.20 7.46 9.00 4.30 320.00 25.00 Sources: Bloomberg Finance LP, Deutsche Bank Research Financial Forecasts Key interest rate, % 3M interest rates, % 10Y government bonds yields, % Exchange rates On a bumpy road into summer break 15 | July 2, 2018 Focus Germany German data monitor DX Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Jan 2018 Feb 2018 Mar 2018 Apr 2018 May 2018 Jun 2018 Business surveys and output Aggregate Ifo business climate 102.3 104.3 105.0 104.1 102.1 104.8 104.2 103.4 102.2 102.3 101.8 Ifo business expectations 100.8 102.1 103.0 100.6 98.6 101.4 100.3 100.1 98.7 98.6 98.6 Industry Ifo manufacturing 105.9 108.0 108.9 107.8 104.8 109.4 107.8 106.3 104.9 104.8 104.7 Headline IP (% pop) 1.5 1.6 1.0 0.3 0.0 -1.7 1.6 -1.7 Orders (% pop) 1.2 2.3 3.5 -2.2 -3.5 -0.2 -1.1 -2.5 Capacity Utilisation 86.1 86.9 87.7 88.2 87.8 Construction Output (% pop) 5.4 -0.4 -1.0 5.9 -7.2 Orders (% pop) -2.0 -1.7 10.2 -1.7 -12.8 9.9 -15.1 2.6 Ifo construction 108.1 109.9 110.7 110.1 111.5 110.2 109.3 110.8 111.4 111.8 111.3 Consumer demand EC consumer survey 3.6 4.1 5.5 6.7 5.5 7.4 6.5 6.1 6.1 5.9 4.6 Retail sales (% pop) 0.5 0.5 0.8 -0.6 -0.6 -0.1 0.2 1.6 -2.1 New car reg. (% yoy) 0.0 0.3 4.2 4.0 11.6 7.4 -3.4 8.0 -5.8 Foreign sector Foreign orders (% pop) 1.5 3.5 4.9 -4.6 Exports (% pop) 1.6 0.7 2.9 -0.6 -0.4 -3.1 1.8 -0.3 Imports (% pop) 1.4 0.2 2.8 -0.1 -0.2 -1.5 -0.2 2.6 Net trade (sa EUR bn) 60.5 62.0 64.3 62.6 21.5 19.4 21.6 19.0 Labour market Unemployment rate (%) 5.7 5.7 5.5 5.4 5.2 5.4 5.4 5.3 5.3 5.2 5.2 Change in unemployment (k) -45.3 -24.7 -54.7 -70.0 -40.0 -24.0 -21.0 -18.0 -8.0 -12.0 -15.0 Employment (% yoy) 1.4 1.5 1.4 1.4 1.4 1.4 1.4 1.4 1.4 Ifo employment barometer 102.6 103.3 104.0 104.8 103.8 105.5 105.0 103.9 103.3 104.1 104.0 Prices, wages and costs Prices Harmonised CPI (% yoy) 1.6 1.7 1.6 1.4 1.9 1.4 1.2 1.5 1.4 2.2 2.1 Core HICP (% yoy) 1.4 1.5 1.3 1.3 1.2 1.3 1.4 1.3 1.0 1.5 1.2 Harmonised PPI (% yoy) 2.8 2.7 2.5 2.0 2.1 1.8 1.9 2.0 2.7 Commodities, ex. Energy (% yoy) 8.9 4.2 -5.6 -12.4 -11.1 -13.5 -12.6 -6.3 5.9 Crude oil, Brent (USD/bbl) 50.8 52.2 61.5 66.9 69.1 65.3 66.0 72.0 76.9 74.5 Inflation expectations EC household survey 17.6 16.3 16.0 16.4 17.3 16.6 18.3 14.4 15.1 16.8 19.9 EC industrial survey 11.4 10.2 14.2 15.0 13.8 16.3 14.5 14.2 14.6 12.1 14.6 Unit labour cost (% yoy) Unit labour cost 2.4 1.8 1.0 2.2 Compensation 2.6 2.6 2.4 2.8 Hourly labour costs 3.9 2.6 2.6 3.7 Money (% yoy) M3 5.6 4.7 4.3 3.3 3.6 3.2 3.3 3.5 4.2 M3 trend (3m cma) 4.1 3.7 3.4 3.3 Credit - private 3.8 3.9 4.2 4.3 4.3 4.3 4.3 4.3 Credit - public 4.1 5.5 -2.9 -20.0 -5.4 -12.9 -20.0 -8.7 % pop = % change this period over previous period. Sources: Deutsche Bundesbank, European Commission, Eurostat, Federal Employment Agency, German Federal Statistical Office, HWWI, ifo, IHS Markit Our publications can be accessed, free of charge, on our website www.dbresearch.com You can also register there to receive our publications regularly by E-mail. Ordering address for the print version: Deutsche Bank Research Marketing 60262 Frankfurt am Main Fax: +49 69 910-31877 E-mail: marketing.dbr@db.com Available faster by E-mail: marketing.dbr@db.com * On a bumpy road into summer break ............................... July 2, 2018 * More signs of slowing (underlying) growth .................... June 11, 2018 * Growth rates have peaked – inflation should still recover .. May 8, 2018 * Trade tensions challenge corporates and government .. April 10, 2018 * Strong growth, limited inflation .................................... March 13, 2018 * German economy: It is party time ............................. February 6, 2018 * Outlook 2018: Robust growth – fragile politics ............................ December 15, 2017 © Copyright 2018. Deutsche Bank AG, Deutsche Bank Research, 60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”. The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change with out notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made. In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, licensed to carry on banking business and to provide financial services under the supervision of the European Central Bank (ECB) and the German Federal Financial Supervisory Authority (BaFin). In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG, London Branch, a member of the London Stock Exchange, authorized by UK’s Prudential Regulation Authority (PRA) and subject to limited regulation by the UK’s Financial Conduct Authority (FCA) (under number 150018) and by the PRA. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Inc. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating t o any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Printed by: HST Offsetdruck Schadt & Tetzlaff GbR, Dieburg ISSN (Print) 2510 - 5248 / ISSN (Online) 2512 - 0824 Focus Germany
1.0.5