Economy

Trade dispute slows China’s economic growth

The Chinese economy lost further momentum over the summer months. Economic growth in the third quarter was again lower than in the previous quarter, falling to a new 27-year low of 6.0 percent (y/y). Market estimates were thus slightly missed, but our own somewhat more sceptical expectations came true. The downward trend that began at the beginning of last year with the outbreak of US-Chinese trade disputes has continued. The largest growth losses occurred in industry, which recorded its lowest increase since 1990 in the past quarter at 5.0 percent. This figure would have been even weaker if industrial production had not picked up visibly in September, the month that ended the quarter. We remain cautious, however, as to whether this will signal a reversal of the industrial downturn. On the contrary, as in the course of the year to date, this could conceal government measures that have been brought…

Commercial real estate market still unaffected by downturn

Without climate change, the real estate market would presumably be the top topic in Germany. Almost every week, high purchase prices and barely affordable rents are reported. And the financial supervisory authorities are concerned about high valuations of residential and commercial real estate. With a view to negative bond yields, however, interest in the real estate market will not stop soon. The general conditions for the commercial real estate markets in the seven top German locations – Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart – have deteriorated. International crises are weighing on exports. The economy may just miss a recession. The booming e-commerce sector is increasingly affecting the retail sector. However, the top locations are suffering less from a declining pedestrian frequency, which is adding to the shopping miles in many cities. Here, the retail sector can hold its own thanks to the growing buyer potential, rising population numbers…

Much ado about nothing? Trump announces partial agreement in trade dispute with China

China and the United States seem to be heading for a partial solution to the trade dispute. The talks between the two countries, which resumed last week, have at least brought a first success. However, in the past two years, in which the conflict gradually escalated, an agreement had often come within reach. But it failed time and again because of unacceptable or hardly realizable demands on both sides and ultimately also because of the volatility of Donald Trump. This cannot be ruled out this time either. According to the US President, the core of the partial agreement is the willingness of the Chinese to purchase American agricultural products worth between USD 40 billion and USD 50 billion per year. The solution will also include higher imports of Boeing aircraft with a volume of up to 20 billion US dollars. In addition, there is said to have been an initial…

US economy loses momentum

The US economy is not fully immune to the ongoing political pressures. In particular, the never-ending trade dispute with China appears to be becoming an increasing burden for industry. Direct effects are less likely to play a role here than the expectation of higher prices (due to customs duties) and thus declining profit margins. The mood in industry has recently fallen significantly. According to surveys conducted by the ISM Institute, the climate has deteriorated significantly in recent months. In September, the indicator fell below the growth threshold of 50 points. By contrast, the US labor market still appears to be developing robustly, albeit not without flaws. The number of industrial employees has hardly grown since the beginning of the year. The visible slowdown in employment growth compared with the previous year is partly due to the shortage of qualified workers. However, concerns about the robustness of the labor market and…

India needs impetus – tax and interest rate cuts to deliver it

India’s growth was clearly disappointing in the first half of 2019. In the first quarter, gross domestic product (GDP) was only 5.8% up on the previous year’s figure, and in the second quarter, despite all the more positive forecasts, only 5.0% (y/y). The country has thus returned its status as the fastest growing emerging market economy to China, which, despite the trade conflict with the US, still achieved growth of 6.4% in the first quarter and 6.2% in the second. Both private consumption and corporate investment showed weakness in the first half of the year. While consumption was impaired primarily by liquidity and credit bottlenecks in the financial sector, investments suffered from high corporate taxes. After his re-election in May, Prime Minister Modi did not lower these taxes, as many had expected, but on the contrary increased them. But now, in response to weak growth, he has put together an…

Weak industrial performance continues to weigh on EMU economy

Autumn grey tones dominate the economic picture in the euro zone in September 2019. The brightening in August was therefore only temporary. At any rate, this is the result of our calculations for the DZ BANK Euro Indicator, which can indicate economic turning points at an early stage. In the past month, the euro indicator fell by 0.2 percent. With a value of 98.5 points, it is almost exactly at the July level and thus the lowest level for around three years. Compared to the previous year, the indicator lost 1.5 percent. The gap in the J/J rate has narrowed since the beginning of 2019, indicating that at least the pace of economic deterioration has slowed in recent months. In August, surprisingly positive data from the industrial sector set the tone and boosted the euro indicator. In September, industry data now pointed in the opposite direction again. The survey of…

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