Economy

A fateful vote in Italy – regression or progress

This year has already seen some fateful votes with surprising outcomes. The British decided in favour of Brexit and the USA for the experiment Trump. In a few days Italy is also facing such a fateful vote. And here, too, the country is deeply divided. A lot is at stake: Can Italy finally become governable? On 4 December Italians are to vote on Prime Minister Renzi’s planned constitutional reform. The purpose of this reform is to make it easier to govern the country: at the moment, every law has to get through three readings in both chambers of parliament – the Chamber of Deputies and the Senate. Since in the past a government has seldom been able to rely on a majority in both chambers, proposed legislation has frequently been blocked or diluted. This perfect bicameralism has made it incomparably hard to govern Italy and has ultimately led to frequent…

The myth of the year-end rally – will there be one again in 2016?

While it is possible to evidence the existence of the „year-end rally“ or the „January effect“ on the basis of historical time series, signs of a year-end rally on the DAX could usually already be noted at the end of September. In the final quarter, the DAX gained an average 3.8% as shown in our analysis of DAX monthly returns dating back to 1960. This was originally based on the theory that, in former times (i.e. 80 years ago rather than 20 years ago), many private investors waited for the year-end closing date and then started buying again in January. What’s more, political events of major importance in the USA very often take place in January, e.g. the investiture of a new President or of Congress, or the US President’s speech to the nation. Decades ago, seasonality strategies made sense at certain times of the year because business life really…

German business climate index is unimpressed by US election and still at a high level

After rising significantly during the past few months the ifo Institute’s business climate index has stagnated in November at a comparatively high level. The business climate is thus back at 110.4 points again, higher than it has been since April 2014. So Donald Trump’s election as the next president of the United States has not had any major repercussions on sentiment at German companies. While the firms still view their current business situation in a positive light, their business expectations for the next six months deteriorated slightly. In manufacturing industry the assessment of the business situation became slightly dimmer. Compared to the good result in October, the expectations for the next six months even deteriorated somewhat more significantly. But despite the recent decline, the level of the business climate index remains relatively high. Apart from the previous month’s result (16.4 points), at 14.7 points the current response balance is the…

Eurozone economy in good shape, Trump gives no cause for concern

The preliminary release of the results of the purchasing manager’s survey in the EMU reveals a visible improvement in sentiment among European purchasing managers in November. The Composite Index has risen from 53.3 to 54.1 index points, marking the highest level in 11 months. Largely responsible for this gain is the services sector which registered a renewed strong increase from 52.8 to 54.1 index points. In the manufacturing sector, only a slight gain was noted of 0.2 to 53.7 index points. The purchasing managers claim that new orders are on the rise. This has resulted in higher order volumes and the second-largest boost to employment since February 2008. At this juncture there cannot be any talk of a deterioration in sentiment due to the unexpected outcome of the US presidential election. The sentiment barometers reveal no signs of a negative „Trump effect“. If anything, the Eurozone economy is far likelier…

DZ BANK Research Outlook for 2017

Fiscal policy will stimulate the global economy, but growth will remain fragile / central banks not more expansionary / stock markets with moderate upside potential The global economy will only slowly pick up pace in 2017. It will be bolstered by increasing fiscal-policy stimuli. Inflation will edge up above all owing to the energy-price-related baseline effect. Thus, there will be no talk of an even more expansionary monetary policy. Interest rates will remain very low, especially in the Eurozone. The existing lack of appealing investment opportunities in combination with the global economy’s slightly brisker growth will also boost the stock markets. The DAX should close 2017 at around 12,000 points. The global economy is estimated to grow by 3.0 percent in the coming year, whilst 2.8 percent is expected in the current year. Growth worldwide continues to not be very dynamic. Some countries will try and use fiscal programmes to…

German economic growth weakens slightly in the third quarter, but domestic demand remains robust

The growth in Germany’s gross domestic product shifted down another gear in Q3 2016. Having increased by +0.4 percent in the second quarter, macroeconomic output between July and September only rose by +0.2 percent. As is customary with flash estimates, no exact details have been released on the development of the individual components. According to data from the German Federal Office of Statistics, foreign trade environment acted as a brake, as exports contracted slightly, while imports climbed somewhat. As in past quarters, the key pillars of growth were government and private consumer spending. Construction investments probably also edged up, with by contrast less being invested in plant and equipment. In the wake of a strong opening to the year with growth at +0.7 percent and a robust Q2 performance, the largest economy in Europe is running slightly out of steam. It is no great surprise that there is now no…

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