Bielmeiers Blog

Stefan Bielmeier, DZ BANK’s Chief Economist and Head of Research, comments on economic developments in Europe, the USA and the Emerging Markets, assesses international financial market trends and gives his opinion on politics and economic policy – concisely, succinctly and to the point. The economics and financial market experts of DZ BANK’s Research division support Stefan Bielmeier in his blog. Find out more in Bielmeier‘s Blog about DZ BANK Research’s current topics, the experts’ focal areas, and their general viewpoints on the latest developments.
The end of globalisation

Global economic growth has been disappointing for some years now – and it is still flagging. This year the global growth rate will probably be no more than 2.7 per cent. This is the lowest rate since crisis year 2009. One of the most important reasons for the sluggish pace of growth is to be found in the companies’ reluctance to invest, especially in the industrialised countries. In the United States companies have already been investing less in new plant and equipment for as long as three quarters. In other important national economies companies have also been conspicuously reluctant to invest for some time now. Often cited as possible reasons for this slack investment activity are pessimistic turnover forecasts, restrictive lending by banks or the heightened global uncertainty. In our view, there is yet one more reason for the disappointing investment activity: the trend towards globalisation in the world economy,…

Japan: Sluggish economy in the second quarter

The Japanese economy did little more than stagnate in the second quarter, growing only 0.2 per cent (q-o-q, annualized). This setback does not come as a complete surprise given the surprisingly strong figure in the first quarter, when GDP grew 2.0 per cent (also q-o-q, annualized). Nevertheless, the latest figure fell short of the market’s expectations. All the same, compared to the year-earlier period Japan’s economy climbed back into the black again, with a growth rate of +0.4 per cent (y-o-y) after two quarters in the red. Major reasons contributing to the weak performance in the spring quarter include external influences such as production shutdowns in April in the wake of the earthquake on south island Kyushu, where many companies have automobile and IT production plants, which are export-intensive industries. Exports then also fell steeply in the second quarter (-1.5% q-o-q, simple rate). But inventory depletion (-0.2 % q-o-q) also…

Unparalleled mood on the German property market

German Olympians have not quite found their groove in Rio. Germany is yet to reach double figures in the medals table and therefore has quite a way to go if it hopes to match its sporting achievements of the past. By comparison, after many years of decline, the current mood in the domestic property market can almost be considered record-breaking. This is reflected in the property price index for the second quarter that has been released by the Association of German Pfandbrief Banks (vdp). This reports a year-on-year increase of 6.3% in the vdp price index for owner-occupied housing, which is the strongest improvement since the index was first compiled in 2003. Even greater growth of 7.3% was recorded for condominiums, while the rise for single-family and semi-detached houses was slightly lower, at 5.9%. Overall, price rises are therefore considerably higher than at any point in the recent past, moving…

India: important consumer tax reform initiated

India’s upper house of parliament has finally enacted a constitutional amendment to pave the way for Prime Minister Modi’s draft reform on a uniform national consumer tax. The uniform goods and services tax was at the very top of his agenda and is aimed at ending the confusing coexistence of central government consumer tax, regional taxes and levies with some very different tax rates in part for individual goods and services, and replacing these with a uniform value-added tax system. The reform also includes national rules for the deduction of tax at source. Up to now, each of the 29 federal states could raise their own consumer taxes and levies, so that different product groups were subject to very different charges. This impacted severely on India’s domestic trade – through controls, additional costs and bureaucracy. The law and the corresponding constitutional amendment were approved by the lower house of parliament…

British economy heading straight for a recession

In the final analysis, this was to be expected: but the impression gained from the latest survey indicators on sentiment in the British economy directly after the Brexit vote is overwhelming. The industrial climate, measured in terms of the Purchasing Managers’ Index for the manufacturing sector, plummeted in July to the lowest level in three years, with the almost four index-point drop the strongest even in five years. At just around 48 points, the indicator now lies way below the 50 point threshold considered to be the starting point for growth. The purchasing managers’ assessment even deteriorated noticeably during the survey period. Compared with a preliminary estimate, which was only based on 85 percent of the survey results, this final indicator reading has been revised downwards again by nearly a full percentage point. The surveyed companies unanimously cite the now widespread uncertainty over the economic consequences of the referendum as…

Expansionary central bank policies act as a sedative for the markets

We have seen an increase in economic and political risk factors in recent weeks. While the consequences of the Brexit decision can only be speculated on up to now, the implications of the negative consequences are already evident in the first confidence surveys and purchasing mangers’ indices. Political uncertainty in countries such as Spain or Portugal, where the formation of the government is a never-ending process, is being suppressed in the face of new major issues. Many investors reacted anxiously to the problems in the Italian banking sector, which prompted speculation about the necessity of another bank bailout by the state. In France and Germany, several terrorist attacks rather than economic issues are fuelling mounting uncertainty. One might have expected that a heightened mix of risks would impact on investor sentiment and that volatility on the markets would remain high. In fact, the situation on the foreign exchange markets has…