Economy

Economic damage caused by corona virus should remain limited

From a medical and human point of view, the outbreak and rapid spread of the new corona virus in China and beyond its borders is certainly very regrettable and worrying. From an economic point of view, however, the damage should be limited at present. This should be due not least to the rigorous crackdown by the Chinese authorities and their – unlike during the SARS epidemic 17 years ago – almost astonishingly transparent information policy. A comparison with the spread of SARS in the winter of 2002/03 and its economic consequences is, of course, obvious at present. At that time, consumption in China collapsed, and passenger air travel also declined significantly. In neighbouring Taiwan, Singapore and Hong Kong, economic output shrank. At that time, however, the Chinese authorities had kept information about the outbreak of the epidemic under wraps for as long as possible. During this time, the virus was…

Purchasing managers in the EMU are cautiously optimistic

At first glance, the mood among purchasing managers remains subdued at the beginning of the new year 2020 according to the survey by IHS Markit in the euro zone. The comprehensive composite purchasing managers‘ index on the situation in industry and services remained at the previous month’s level of 50.9 points in January according to the preliminary publication. In detail, however, the business outlook is brightening, probably also due to the initial de-escalation in the Pacific trade dispute. Another ray of hope is the development of incoming orders, which the purchasing managers surveyed are no longer as pessimistic as in previous months. At least for the rest of the year, this gives reason to hope that the economy in the euro zone has put the worst behind it and is continuing to stabilize. It is true that the dichotomy between weak industry on the one hand and a service sector,…

Industrial economy slows down growth of corporate loans in Germany

The economic problems in parts of German industry are increasingly reflected in the banks‘ lending business. As the results of the latest ECB Bank Lending Survey in Germany show, banks tightened their lending conditions for companies in the final quarter of 2019, for example by widening margins. Although the demand for credit from corporate customers continued to rise overall, this was not the case in the first quarter of 2019. However, growth was driven by small and medium-sized enterprises, while demand for loans from large companies actually declined. For the coming months, a clear majority of banks expect demand for loans from corporate customers to shrink. Compared to the October survey, the share of pessimistic banks has even increased, especially with regard to large companies. Even if no further tightening or even loosening of lending guidelines is planned for the time being, the growth of corporate loans on banks‘ books…

All quiet

The geopolitical start of 2020 was at times turbulent with developments in Iran. However, it has become clear once again that no party wants to risk the beginning of an escalation spiral. This was particularly striking and also surprising in the case of Iran. However, the way in which the provocation and subsequent de-escalation was provoked and then de-escalated follows a certain pattern that has been observed again and again in recent years. Political issues are likely to continue to dominate in 2020. Above all, the election of the president in the USA in November. There are many reasons for Trump’s re-election. The smouldering impeachment procedure could still prevent him from re-election. But this would require much more evidence and incriminating material against Trump. Otherwise, the US President should be able to rely on his majority in the Senate. Apart from the brexite, there are no major political events in…

China: Downturn pauses, but US deal is not a stimulus package

  The economic downturn in China lost much of its sharpness at the end of 2019. Economic growth did not lose further momentum in the fourth quarter. At an unchanged 6.0% (y/y), the current growth rate is not only in line with market expectations but also just within the growth range set by Beijing – this is still a political issue in China. Certainly, the de-escalation in the trade dispute with the US and the hope for at least a partial settlement have played their part in easing the downward pressure on the Chinese economy. Even if US President Trump initially only took further tariff increases off the agenda, this has given China’s export industry a breathing space in recent months. However, the economic stabilisation does not appear to have been entirely without government stimulus. This suggests the marked acceleration in industrial growth at the end of the year, which…

Initial concerns about negative interest rate policy are becoming apparent in the ECB

The summary of the ECB’s last Council meeting in December (accounts) does not provide any indication of an early change in the monetary policy stance. The monetary watchdogs continue to expect continued weak growth momentum in the euro area, but at least the first signs of economic stabilisation have been identified. In this context, reference is made to the rapprochement in the trade dispute (China/USA), which has made an escalation of the conflict less likely. However, as uncertainty factors (including brexite) continue to exist, the economic outlook is still subject to downside risks. With regard to the inflation trend, the monetary authorities are convinced that a stronger upward trend in prices can be expected in the coming months. The ongoing economic growth and solid wage development would support this trend. In the course of the discussions, some Council representatives suggested that the causes of the persistently low level of inflation…

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