Economy

Restrictions are increasing – what is the next step?

The restrictions in daily life are becoming increasingly noticeable in Germany as well. The service sector lies largely idle, following in the footsteps of the manufacturing and automotive industries. The economic losses will be correspondingly high. According to the current set of rules and regulations of the policy to combat Covid-19, German GDP is shrinking by around 2.25% per month. This shows that the current restrictions on daily life can only be sustained for a limited period of time. At the latest by the end of April, the situation should ease, otherwise the economic damage would be very severe and could also leave lasting structural marks. The German government’s current forecasts for GDP growth in Germany of -5% probably made similar assumptions. The hope of the federal and state governments must therefore be that the current course will be successful and that the number of new infections will be reduced…

Deep red economic figures from China

It was more than foreseeable that the corona shutdown in China would result in massive economic losses. However, it was difficult to estimate how large the losses would be and even more difficult to predict whether the Chinese leadership would even reveal the full extent of the collapse. Even the announcement of the record-low purchasing managers‘ indices two weeks ago came as a certain surprise. The now published growth figures from industry, retail trade and construction reflect the devastating mood polls of February: economic activity has collapsed in the double-digit percentage range. Industrial production contracted by a quarter in February compared to the already weak previous month. Output in January and February combined was more than 13 percent below the level of the same period in 2019, while retail sales fell by more than 20 percent year-on-year. Taking into account the currently high inflation, they are likely to have collapsed…

Italy fully covered by corona virus

With its high infection rates, Italy is the epicentre of the European corona crisis. There, the corona virus Sars-CoV-2 continues to spread. Almost 10,000 people have been infected in Italy and the number of deaths is almost 500. After initially only a few villages were quarantined, on 8 March the government declared large parts of the economically strong north a restricted zone and restricted the freedom of movement of around 16 million people. However, since quite a few people from the north to the south of Italy are likely to have moved, in a further step on 9 March the closures and restrictions on freedom of movement were extended to the whole country. International train and air connections and local public transport are not to be suspended, but will be subject to tight controls. Schools, universities and kindergartens throughout the country will remain closed until at least 3 April. Sporting…

Optimism fades in corporate banking

After Germany’s gross domestic product (GDP) was still able to grow by 1.5 percent in 2018, last year it was only 0.6 percent. After all, this is the tenth year in a row that GDP has increased. Last year, however, the economy only declined in the second quarter. In the third quarter, it picked up again somewhat, but stagnated in the final quarter. Foreign trade in particular, but also weak investment in machinery and equipment, was responsible for the unsatisfactory result. Construction investment and consumption were significantly better. However, the spread of the corona virus this year brings with it a new risk for the German economy. The weak economy in the final quarter of 2019, and in particular the further quarter-on-quarter decline in investment in machinery and equipment, is partly responsible for the fact that corporate loan portfolios in Germany are continuing to lose momentum. Only long-term loans with…

Inflation rate in the EMU falls again – and remains weak

The upswing in consumer prices in the euro zone eased in February. According to preliminary calculations, the inflation rate, measured by the Europe-wide harmonised consumer price index (HICP), fell from 1.4 percent in January to the current 1.2 percent. The inflation rate for food, industrial goods and services even rose slightly. However, energy prices declined year-on-year, which depressed the overall inflation rate. From the current perspective, inflation is expected to remain subdued in the coming months. While at the beginning of 2020 the course was still set for economic stabilisation in the currency area, the picture has changed with the corona wave. The spread of the corona virus SARS-Cov-2 with the corresponding economic consequences is likely to have a noticeable impact on the economy in the euro zone in the coming months. The expectation of a weaker economy is reflected not least in a significantly lower oil price. As a…

China: Mood in the cellar

Due to the corona eruption, the Chinese economy is currently experiencing the worst slump in growth since the financial crisis of 2008/09, and the results of the recently published purchasing manager survey give a first impression of how dramatic the losses are. These are the first comprehensive economic indicators for the month of February and they paint a devastating picture. The survey results from the industrial sector have each fallen by more than ten index points compared with the previous month. There has not been such a slump within one month since the survey of the indices. By way of comparison, in autumn 2008 the two indicators each lost around twelve points within two and three months respectively. Moreover, both indices have currently reached new all-time lows of 40.3 points (survey by IHS Markit) and 35.7 points (survey by the Chinese statistical office). The survey in the service sector has…

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