Economy

USA vs. China – Trump turns customs screw again

After a break of several weeks, trade talks between the USA and China took place again last week for the first time. Apparently, however, there was little willingness on the part of the Chinese delegates to accommodate American interests. Otherwise it is hard to understand that immediately after the end of the consultations there was talk of good talks, but the US President suddenly announced the introduction of further punitive tariffs on 1 September. Thus the trade conflict between the USA and China is now climbing a new escalation stage, after it had looked as if this cliff had been avoided at the G20 summit in Osaka. Even if Trump believes that China is paying the tariffs, the negative effects will ultimately hit the US economy. US exports to China have fallen sharply due to retaliatory measures and were 18 percent down on the previous year in the second quarter….

EMU economy still unable to find a foothold

The outlook for the economy in the euro zone deteriorated further in July. This is shown by DZ BANK’s euro indicator, which fell by 0.3 percent in the past month. The leading indicator for economic development is now at 98.4 points, the lowest level for around three years. The annual rate of change also declined slightly in July, falling from -1.8 to -1.9 percent. As in previous months, the industrial sector was particularly weak. Incoming orders declined and companies further reduced their production expectations for the coming months. The purchasing managers surveyed by IHS Markit were also more pessimistic. In July, the purchasing managers‘ index for the euro zone fell to its lowest level since December 2012. According to the respondents, the ongoing trade conflicts, the crisis in the automotive industry and political uncertainty damaged domestic and export demand. Meanwhile, the financial markets showed a mixed picture last month. While…

Economic slowdown in the euro zone continues

The economic slowdown in the euro zone is progressing. At 0.2 percent, growth in the euro zone in the second quarter of the current year was only half as high as in Q1 compared with the previous quarter. Not surprisingly, the domestic economy supported growth, while net exports were more likely to dampen growth. This is consistent with the general picture of a rather difficult international environment hampered by geopolitical economic risks and protectionist tendencies. Data from the euro area suggest slightly positive economic growth in Q2 in Germany. The outlook for the economy in the euro zone is not promising. Almost all relevant leading indicators in the euro zone have fallen in recent months and point to a further slowdown in growth, with industry in particular suffering from weak world trade. However, a slowdown in growth momentum can also be observed in the domestic sectors in the meantime. The…

Eurozone: Economy and inflation „running out of steam“ – Italy remains growth taillight

Economic growth in the euro zone slowed markedly in the spring. At a meager 0.2% compared with the previous quarter, growth was only half as high as in the first quarter of 2019. Details are not yet available with the preliminary estimate. However, it appears that domestic demand continued to be supportive, while net exports tended to slow. This is consistent with the general picture of a rather difficult international environment hampered by geopolitical cyclical risks and protectionist tendencies. A guarantor for steady domestic demand in the euro zone remains – at least for the time being – the well-functioning labour market and gradually rising wages. But the ongoing boom in the construction sector is also maintaining investment activity. First country results had already indicated the weakened quarterly result for the euro zone. Economic growth in France fell from 0.3% to 0.2%. Italy is stagnating and is therefore likely to…

USA: Solid economic growth in Q2, thanks to consumer buying propensity

Thanks primarily to a strong boost from private consumption, the US economy grew by 2.1 percent over the year as a whole in the second quarter. Compared to the strong start to the year, the growth momentum has thus slowed down less than expected. On the other hand, the significant slowing effects of foreign trade and inventories are in line with our expectations. On the one hand, these had clearly supported growth in the first quarter. On the other hand, both factors have been reflecting the ups and downs of the trade conflict with China for about a year now and are therefore showing strong fluctuations. The latest figures show that private consumption continues to fulfil its role as a growth guarantor. Given the very good employment situation in the USA, this is not too much of a surprise. After two consecutive quarters of rather subdued growth rates in private…

SPF – Increasing doubts about approaching inflation target

This morning, the ECB released the results of a recent survey of professional market observers on the economic and inflation trends in the Euro-Zone. According to the Survey of Professional Forecasters (SPF), the economic outlook for the Eurozone for the coming year has deteriorated slightly. The GDP outlook for 2020 was lowered to 1.3% from 1.4%. The growth outlook for 2021 was left unchanged at 1.4%. Compared with the current ECB staff projections, the SPF survey assumes a slightly weaker cyclical dynamic for the coming year (see table below). With regard to further inflation developments, the SPF survey points to inflation remaining at a low level in the coming years. Market observers have revised their previous forecasts downwards across all forecast horizons. For the coming year, respondents expect an inflation rate of 1.4%. In 2021, the inflation rate is expected to be only marginally higher at 1.5%. It is particularly…

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