Economy

Construction boom supports the German economy

The fact that the German economy did not slide even deeper into recession because of the Corona pandemic is due not only to government consumption, but above all – in contrast to other countries such as the UK – to the pleasing development of the construction industry. It is true that construction investments also declined this spring. However, this was not due to the corona crisis, but to the extremely positive performance in the first quarter. In the first half of 2020, construction investments increased by 3.2 percent in real terms and by as much as 6.3 percent in nominal terms compared with the same period in the previous year. By way of comparison, investment in machinery and equipment slumped by 18 percent in nominal terms and by over 19 percent in real terms in the same period. The importance of construction investments for the German economy thus continued to…

German savings rate shoots up to over 20 percent in Q2

In „normal times“, the savings rate of private households in Germany follows a seasonal pattern: in the first quarter – after Christmas and before the vacation season – citizens put a high proportion of their income on the high side at an average of just over 14 percent, while the savings rate in the following quarters is significantly lower at around 9 to 10 percent. As a result of the Corona crisis, however, the usual pattern is being seriously disrupted this year. Already in the first quarter, the savings rate of 16.5 percent was significantly higher than in previous years, and in the second quarter it even shot up to 20.1 percent. The reasons for this are to be found in the fear of income losses due to short-time working or unemployment, in lockdown and travel restrictions, which massively impeded private consumption, especially in the first half of the second…

The state is not a good entrepreneur

This week the cabinet extended the short-time work allowance. With this move, the German government wants to build on the successful use of this measure so far and benefit from it in the election year. The short-time working allowance has certainly proven to be a very effective crisis management instrument in earlier, relatively short recessions. However, the side effects increase with the duration of its application, and this is currently all the more true in combination with insolvency protection and growing state involvement. The short-time work allowance preserves structures and prevents necessary adjustments. Urgently sought specialists remain in companies whose business models often no longer exist or are severely damaged. As a result, the necessary renewal processes are increasingly overridden. And there is a growing danger that the German economy will continue to lose efficiency and competitiveness in the wake of the Corona crisis. The Federal Government made many things…

Delayed summer sales push inflation rate below zero in the EMU

  Inflation in the euro zone weakened quite considerably in August. The Harmonized Index of Consumer Prices (HICP) in the monetary union fell from +0.4 to -0.2 percent. Overall inflation is still being dampened by the low level of energy prices. However, the bulk of the decline in many countries is attributable to the late summer sales, which were postponed from July to August as a result of the corona pandemic. In the consumer basket of goods, there was a significant fall in the price of non-energy industrial goods. These are typically the goods of the classic retail trade. While clothing and shoes were unusually expensive in Italy and France in the previous month, for example, and thus gave a noticeable boost to the overall inflation rate, the upturn in prices fell significantly with the summer sales in August. On a country level, the corrections were felt in annual rates…

Avoid extremes

  Gold is one of the big winners of recent developments. Rising debt levels, low interest rates for an incalculable period of time and increasing political uncertainty in many parts of the world have led to a strong increase in interest in gold. At the same time, gold is supposed to make portfolios more resistant to risks that can only be assessed vaguely or not at all from the current perspective – so-called black swans. Besides gold, industrial metals in particular have risen sharply. Of course, the rapid economic recovery in China and the fiscal measures taken in other industrial countries played an important role in this. In addition, a certain scarcity premium is slowly becoming noticeable for many industrial metals. In the medium term, the rapidly advancing digitalization should lead to a noticeably higher demand for metals that are needed in this sector. This goes so far that many…

USA: Recovery on the labor market continues, but momentum is likely to decline further

The situation on the US labor market continued to improve in August as a result of the economic recovery: although slightly fewer jobs were created than in July, the overall increase in employment was quite respectable at around 1.4 million. As a result, the unemployment rate fell surprisingly sharply from just over 10 percent to 8.4 percent, possibly as a result of the now significantly reduced federal subsidies for unemployment assistance. According to the Statistics Office, however, there are still errors in classification, so that the unemployment rate is likely to be somewhat higher. Nevertheless, the latest labor market figures give a positive signal for the US economy, which is receiving a lot of attention, especially during the election campaign, and Donald Trump is certainly welcome. Once again, job growth was mainly in the service sector, where the employment situation continues to „normalize“. In the retail trade and the leisure…

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