Economy

German economy under pressure

The economy in Germany deviated from its growth course in the spring of 2019. Between April and June, economic output fell slightly by 0.1 percent compared with the previous quarter. At the beginning of the year, growth was still 0.4 percent. The decisive factor was the international burdens, which were mainly affecting German industry. The Federal Statistical Office reported that German exports fell more sharply than imports in the past quarter, which slowed the economy. In addition, construction investments declined, but this was mainly due to a special statistical effect. Overall, the construction industry continues to perform well and is supporting economic development. In the past quarter, positive impetus came from private consumer spending, which continued to grow. With high employment and rising incomes, the environment for consumption remains favorable. The state has also increased its consumer spending. Despite the uncertain global situation, companies increased their capital expenditure. This shows…

More savings in Germany

The environment for private household investment in Germany remains difficult. While the ECB’s announcement in September last year that it would phase out its net bond purchases in stages still raised hopes that the low-interest phase would subside, these hopes evaporated again at the turn of the year. With the slowdown in economic growth in Germany and Europe and the intensification of the trade conflict between the USA and China, monetary policy normalization receded into the distance. The average current yield on fixed-interest securities has been falling for months – with a negative sign since June. While expansive monetary policy and low interest rates are pushing up demand for equities as an investment alternative, trade disputes and a gloomy economic outlook are weighing on the sales and earnings prospects of listed companies. This limits price potential and increases volatility. In the first quarter of the current year, private households once…

Japan: surprisingly high economic growth in spring

Japan’s latest macroeconomic growth figures are unexpectedly positive: In the second quarter, the economy grew by 0.4% compared with the previous quarter, which in turn has been revised upwards again from 0.5% to 0.7% (Q/Q). This came as a surprise after most sentiment indicators such as the consumer climate and the sentiment among companies measured in the central bank’s Tankan Index had recently been on a continued downward trend. Nonetheless, consumption increased by as much as 0.6% (Q/Q) in the second quarter, and investment activity was not so bad either: gross fixed capital formation grew by 1.2% (Q/Q). After all, the state also increased its consumer and investment spending somewhat in the past quarter, thus contributing to the surprisingly high overall growth before the middle of the year. However, foreign trade cost some growth overall. Exports fell slightly in terms of volume; however, the fact that there was „only“ a…

Brexit effects lead to first growth minus in Great Britain in six years

The Brexit has still not been completed, but is already leaving its mark on the British economy. In the second quarter of this year, economic output in the UK shrank by 0.2% compared with the first quarter of the year – the first decline since the end of 2012. The manufacturing sector had a major braking effect, with production falling by almost 2.5% and thus falling more sharply than at any time since the financial crisis of 2008/09. The service sector, which is important for the British economy, only stagnated during the three spring months, while the financial industry continued to shrink. It is not yet the trade barriers themselves that are weighing on British growth. They would be expected in the event of Britain’s unregulated exit from the EU – which has become more likely again since Boris Johnson took office – and would, in our view, plunge the…

Summer rest is cancelled

The summer rest is cancelled this year. The crises of this world are intensifying everywhere. Of course, the development of the trade conflict between the USA and China is the focus of discussion on the international financial markets, and here, too, the escalation screw continues to turn lively. The consequences for the real economy are slowly beginning to emerge. World trade growth is stagnating and growth prospects are darkening – the export-oriented economies are disproportionately affected. This does not leave the balance sheets of companies unscathed. In the current reporting season there have already been some profit warnings and the quality of the corporate balance sheet has deteriorated on average. Overall, the outlook has deteriorated noticeably. The stock markets have so far ignored this development. However, with the announcement that tariffs in the USA for Chinese imports are to be expanded further, the dams have now been broken. Even if…

A higher national debt would even make sense now

The black zero in Germany is wobbling. Expenditure wishes and revenue expectations are diverging more and more. The burdens are coming from both sides. As the economy weakens, tax revenues will decline in the long term, while spending expectations will continue to rise. Even last year there was a comfortable surplus: In the overall public budget, revenues in 2018 were almost 54 billion euros higher than expenditure. And this despite the fact that last year government spending grew more strongly than tax revenues. I am actually a great friend of a balanced budget for states, especially against the background of intergenerational justice. This, however, is currently being made absurd. The Federal Government can currently go into debt with negative interest rates. Increasing indebtedness does not, therefore, lead to a burden on future generations. Assuming a positive return on investment in growth and employment, today’s rising debt would also have a…

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