Economy

Euroland purchasing manager indices: Industry brakes and surveys point to ongoing muted growth

On balance, the sentiment amongst European purchasing managers has brightened slightly in February. The Composite Index rose from 51.0 to 51.4 points, which in the wake of the latest falls corresponds to the highest level in three months. The improvement can be attributed solely to the service sector, where the sentiment barometer rose. The yardstick for manufacturing lost ground, by contrast, and at 49.2 points it is not only below the growth threshold of 50, but also the lowest figure in five years and eight months. Production decreases, dwindling demand and declining export business are all impairing sector sentiment. Judging by the survey results, the Euroland upturn should continue although the growth rates will presumably remain muted. The preliminary figures released on February sentiment among German purchasing managers painted a mixed picture. The Composite Index for Germany edged up from 52.1 points in January to 52.7 in February. However, this…

US: escalation on the domestic political front but foreign trade deals might be possible?

Only the courts can stop Trump now and prevent the misappropriation of budgetary resources. With the first primaries of the presidential election starting already in one year, the polarisation and division in domestic politics will increase. The latest escalation level does not bode well either for the next deadline for raising the debt ceiling, which is on the agenda shortly. The negotiations for budget year 2019/2020 that starts on 1 October are unlikely to go any better than this time round. As far as foreign policy is concerned, Trump will on the other hand probably retain his dealmaker status. He is clearly very keen to be re-elected next autumn. Talks on the trade disputes with China are currently in full swing and it is quite possible that further punitive tariffs will not be imposed. The cooling-off period agreed on by the heads of both countries ends already at the end…

US: agreement reached on the federal budget but Trump’s political escalation shows no signs of abating

The two parties and the US president reached an agreement on the budget dispute a few days ago, just before the deadline was set to expire. Another shutdown of numerous federal authorities was thus avoided – good news from the US political front. However, just after the compromise was reached, President Trump declared a national emergency in order to access the full amount he had demanded to build a wall at the border to Mexico. Rather than leading to the anticipated easing of internal political affairs, it escalated the confrontation instead. The Democrats and a few individual federal states have already announced their intention to take political and legal action against this. Trump only declared the national emergency to bypass Congress’ budgetary authority, thus creating a precedence in US history. Although the US president holds considerable sway over foreign policy, domestic policy generally requires the approval of the Senate and…

US threats of customs tariffs hang like the sword of Damocles over German carmakers’ necks

On 25 July last year, European Commission President Juncker persuaded US President Trump not to impose punitive tariffs on automobiles. Of late, there has been growing concern about US tariffs on European cars. The US Department of Trade could classify the import of cars and automotive parts as constituting a threat to America’s national security and therefore, from the US point of view, lay the foundations for introducing customs tariffs. The German car industry has in recent years definitely performed gratifyingly. And that despite the diesel scandal and the threat of a few major German cities imposing bans on certain vehicles. However, the car industry’s fortunes have recently shown signs of braking. In 2018, orders from elsewhere in Europe sagged by over seven percent. Within Germany, things were not much better, with a decline of over four percent. Only order receipts for German cars from outside Europe continued to rise…

German economic stagnation in the final quarter 2018

The German economy failed to gain momentum at the end of 2018. Gross domestic product stagnated in the final quarter, with stable private consumption, spending-happy public budgets and the positive trend in investments just about managing to compensate for the weak industrial figures. All in all, economic activity proved very disappointing in the second half of 2018 compared with the brisk first half-year. International factors, such as the US-Chinese trade dispute, the Brexit uncertainty and political squabbling in Europe, had a negative impact here as much as the domestic problems surrounding the automobile industry (diesel problems and new emission standards) and the consequences of the low water levels. Even if these special problems are probably in the process of being resolved, no major leaps in growth are to be expected at the beginning of 2019. Companies are taking a sceptical view to the coming months and, given the many risk…

Only slight recovery in Japan’s economy at 2018 year-end

According to a first official estimate, the Japanese economy grew by 0.3% in the fourth quarter 2018 compared with the previous quarter. The economy had thus managed to recover somewhat from the 0.7% slump in the third quarter resulting from natural events (earthquakes, severe typhoon season), albeit not to the extent originally anticipated. A growth rate for 2018 as a whole has now been recorded of 0.7%. Private consumption in Japan, the most important demand component, developed generally well towards the end of the year and, with a gain of 0.6%, was able to more than compensate the decline from the previous quarter. Corporate investment activities, which were particularly adversely affected in late summer by earthquake-related interruptions in supply chains and production stoppages, have also risen again recently. The increase of 1.5% on the third quarter was not sufficient to offset the previous quarter’s negative rate. The same applies to…

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