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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 "Economic and european policy"

273 (109-120)
June 7, 2016
Region:
109
Fiscal councils can improve the sustainability of public finances. They can increase transparency and accountability of fiscal policymaking by providing unbiased information to the public and stakeholders in the budget process. The design of their mandates, independence, and their public role are key conditions determining effectiveness. The new European Advisory Fiscal Board (EAFB) can be a valuable addition but is unlikely to be a game changer. Far-reaching reforms on the Union’s fiscal framework remain contingent on political will. Independence is crucial for fiscal councils to have an impact. This holds for both the EAFB and national fiscal councils. In addition, cooperation between the new EAFB and national bodies is a necessary requirement for a “European System of Fiscal Boards” to work effectively. [more]
June 3, 2016
Region:
110
We revise down our Q2 GDP growth forecast from 0.3% to 0.1% as we expect material payback for Q1 strength. While we remain optimistic with regards to the labour market, we think that the impetus from low oil prices to real incomes is fading. In addition, the mild winter has allowed construction work to be brought forward, albeit the payback might be limited by the strength of underlying construction demand. Given weak export sentiment, falling investment goods orders and lower capacity utilisation, we think investment in machinery & equipment is going to weigh on Q2 growth. We maintain our 2016 GDP forecast (1.7%), though. Despite spending on refugees, the German national budget generated a surplus of 0.7% of GDP in 2015, the largest since 2000. However, the healthy short and medium-term fiscal outlook only marginally reduces the need for the reform of public finances. [more]
May 12, 2016
Region:
111
CSU leader Seehofer and SPD leader Gabriel have advocated a stabilization of the level of the public pension scheme’s benefits. This would mean to skip one of the past decade’s major social policy reforms that aimed at enhancing the public budgets' fiscal sustainability. Mr. Seehofer has even questioned the complete architecture of Germany’s pension system by also stating that the Riester-Pension had failed. Obviously both party leaders are in search for popular topics for the imminent federal election campaign, given that in 2017 more than one third of the eligible voters will be 60 years old or older. But it is doubtful whether the promotion of pensioners‘ interests will help both leaders to improve their parties’ image. Further topics in this issue: High returns on direct investments in Germany, Global trade growth remains subdued. [more]
April 7, 2016
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Analyst:
112
Last year, the proportion of diesel cars among new car registrations in the EU-15 dropped by 1.5 percentage points to just over 52%. This was the fourth decline in a row. The fall in the diesel share was especially pronounced in France, where the government wants to reduce the tax advantage for diesel over petrol. By contrast, in Germany the diesel share increased slightly last year, due among other things to the large number of commercial car registrations. We expect a further decline in the diesel share in the European car market over the next few years. The higher costs for diesel technology play a role here. However, for high-mileage drivers in particular, the lower consumption and long range of diesel cars as well as lower fuel prices remain convincing sales arguments. Therefore, provided governments do not introduce any serious surcharges for diesel cars, the diesel share of the European car market is unlikely to crash. [more]
April 4, 2016
Region:
113
According to our and consensus expectations Germany will record 4 years (2014-2017) of above potential GDP growth in an extremely narrow range of 1.5% to 1.7%, despite substantial shocks and massive swings in growth drivers. If growth breaks out, a downside move seems more likely than higher growth. The economic slowdown in the oil-producing countries due to the falling oil price also carries implications for the German economy in terms of its foreign trade. Although the overall effect is positive for the German economy, German exports to oil-producing countries remain under pressure. Capital spending on residential construction has been growing sluggishly in recent years. The main reasons are: a shortage of building land, increased regulatory hurdles in virtually all construction sectors, high construction costs and a lack of skilled workers in the construction industry. [more]
March 22, 2016
Region:
114
In 2015, exports of German goods to the oil states declined by 7.4%. This was the third fall in a row. Growing exports to the United Arab Emirates (primarily aircraft) and Saudi Arabia prevented an even worse result. As oil prices will initially remain low, German exports to the oil-producing countries are expected to fall again in 2016. Our export indicator points to a decline of approximately 5%. Among the major German industrial sectors, mechanical engineering is likely to be hardest hit by falling demand from the oil states, as was the case in 2015. Overall, the significance of the oil producers as a market for German industry will continue to decline in 2016. [more]
March 3, 2016
Region:
115
Despite the challenging environment German exporters gained global market share in 2015. The year 2016 has not got off to an auspicious start, however. Our new “Export Indicator” points to a double whammy for German exports in 2016. The less favourable outlook for the demand and especially for the exchange rate impact looks set to slow export growth to around 3% in 2016. When analysing German exports, it is worth looking at sector-specific factors as they can play an even more important role than the macroeconomic environment. Overall, German industry faces a challenging year for exports. Further topics in this issue: House prices: Imminent return to normal, overvaluation likely; GDP growth 2016: More domestically driven & facing more downside risks; Merkel likely to weather even weak state election results. [more]
February 5, 2016
Region:
Analyst:
116
The demand for electric cars in Germany remains low. Their share of total new car registrations was less than 1% in 2015. The clamour is increasing among policymakers in favour of stimulating demand with the aid of cash incentives. The argument is that if such incentives were high enough the market share of electric cars would indeed increase faster than has been the case to date. Nevertheless, there is a host of economic, regulatory and social policy reasons that argue against cash incentives. We continue to favour an integration of road traffic into the EU Emissions Trading System in order to limit the sector's CO<sub>2</sub> emissions [more]
January 28, 2016
Region:
117
After three years of high GDP forecast accuracy, we were off the mark by a substantial margin in 2015. The miss can mainly be traced to our assumptions with regard to oil, the USD, the magnitude of the refugee influx and a bit of bad timing, as the USD and oil saw a massive adjustment right after we had published our 2015 forecast. Last year’s imponderables are once again at the top of our list of forecast uncertainties for 2016. In this issue we also look at the wage round in 2016 and Chancellor Merkel’s asylum policy. [more]
January 21, 2016
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Analyst:
118
Our analysis on labour mobility shows that mobility between EMU countries is relatively low compared to the US. EMU mobility was far higher in the post-crisis period and increased significantly since 2007. In particular, the ongoing, pronounced variation of the labour market situation across EMU countries should remain a driving force of bilateral migration. The higher mobility provides some limited hope for the ECB. However, the increased competition caused by the jump of migration from non-EMU countries will probably put the increased EMU labour mobility at risk, which was dominated by the shift of flows in the direction of Germany as EMU’s stability anchor since the start of the crisis. [more]
December 23, 2015
Region:
119
The financial and economic crisis brought development banks back in the spotlight. They are seen as part of the economic policy toolkit for overcoming cyclical and structural difficulties in economies, complementing financial systems by improving their functioning and bolstering economic resilience. Interest in development banking to promote growth and boost investment has increased especially in Europe of late. Given the current economic environment and changes in Europe’s banking and financial markets, development banks are bound to continue playing an important role in the coming years. Rather than crisis relief, their focus is shifting (back) to supporting structural change in economies. Here, they can play a useful complementary role, focusing on areas of market failure but risks lie with potential “overburdening” of development banks and setting expectations too high for what they can achieve. [more]
December 22, 2015
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Analyst:
120
The manufacturing sector's stock of foreign direct investment (FDI) added up to some EUR 251.1 bn in Germany in 2013. This is equivalent to more than 27% of total German FDI. The data is collated on the basis of the specific business sector to which a German investor belongs. The statistics incorporate the following direct investments of domestic companies and private individuals: firstly, direct cross-border share capital or company voting rights of 10% or more. Secondly, stakes in foreign companies are taken into account if the directly and indirectly (that is via dependent holding companies) held share capital or voting rights exceed the 50% mark. [more]
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