Economy

Euroland: ECB inflation target almost reached

In January 2017, pressures on prices in the Eurozone were clearly much more pronounced than expected. The annual rate leapt to +1.8 percent on the heels of +1.1 percent in December 2016. That is the highest figure in almost four years. The rise in EMU consumer prices has thus taken a giant leap towards reaching the European Central Bank’s inflation target of “below but close to two percent”. The annual rate a few months ago was still only just above the zero-percent mark. Only in the last two months have consumer prices dared move into positive territory again – in unusually sharp bursts. The strong rise in inflation can be attributed to energy and food prices, the latter owing to the cold weather in recent weeks. Euroland inflation looks set to remain relatively high in coming months before falling again in the second half. What is behind the high growth…

US economy: Visible deceleration in foreign trade, but investment saves quarterly result

In the fourth quarter, economic growth in the United States decelerated visibly in comparison to the previous quarter. In the third quarter 2016, strong growth of an annualised 3.5 percent was recorded compared with growth for the final quarter of only 1.9 percent. Foreign trade also deteriorated, with declining exports opposite a marked increase in imports. This effect weighed on growth by no less than 1.7 percentage points and is hardly likely to be welcome by the new US president. It should be noted here though that soybean exports received a strong boost in the third quarter as a result of crop failures outside the United States. As usual, private consumption acted as the ultimate guarantor of growth with a positive contribution of 1.7 percentage points. However, this contribution was not as strong as in the two preceding quarters. Investment stepped into the breach, as it were. With a positive…

Dow Jones and other indices set new records: time for the five most important questions and answers

Many stock market indices are trading higher at the end of January than the majority of analysts expected in their forecasts for the end of 2017. The DAX is also already trading close to the DZ BANK year-end forecast. What further developments can be expected on the stock markets in 2017? The election of Donald Trump as President boosted the stock markets, contrary to expectations. We expect that the DAX could climb close to its record high in the spring. Thereafter, however, disappointment could set in as the Trump effect declines in the USA and focus in Europe shifts to looming political events, for example the elections in the Netherlands and France. The political environment indicates the potential for price fluctuations with a slight increase overall by the end of the year. What is driving the current upwards momentum? The true reason behind the upwards momentum on the stock exchanges…

Italy: After Constitutional Court ruling new elections are more likely as early as in

Yesterday the Italian Constitutional Court decided that parts of the new electoral law for elections to Italy’s lower house, the Chamber of Deputies, which came into effect as recently as 2016, are invalid. The court ruled that a core element of the new electoral law, a run-off vote between the two strongest parliamentary fractions, is against the constitution. However, the rule that any party attracting at least 40% of the vote should receive a majority-building bonus is to be kept. If the latter condition is not fulfilled, then the principle of pure proportional representation applies again. Taking account the amendments, the judges of the High Court declared the electoral law as applicable as of immediately so theoretically nothing would stand in the way of early new elections. The proponents of as early a poll as possible greeted the announcement with enthusiasm. In particular, the left-wing populist Five Stars Movement (M5S)…

British economy still unimpressed by Brexit vote in the fourth quarter

Is the British economy so resilient that it can “swallow” the Brexit shock without suffering any major impairment? One could well arrive at such a conclusion looking at the robust economic trend in Great Britain in the months since the referendum. In the fourth quarter of last year the pace of economic growth continued largely unabated. As the Office for National Statistics reported this morning, gross domestic product recently increased, as during the summer months, by 0.6 percent quarter-on-quarter. With last year’s growth rate of 2 percent the United Kingdom even took the lead among the G7 states as regards growth. These growth figures are “grist to the mill” of Brexit proponents, above all for those who are in favour of a “hard” break with the EU: against this background, the warnings about Brexit’s negative economic effects look like mere scare-mongering. Consumer-focused services made a particularly strong showing in the…

Spain: Will the strong economic growth last

A good year ago, on 22nd January 2016, the first attempt to form a coalition failed in Spain. This was followed by a prolonged period of political gridlock. Many economic policy measures were shelved for the time being. Until today, even the budget for the current year 2017 has not yet been adopted. It took until October 2016 for the major parties to agree to tolerate a minority government led by former Prime Minister Mariano Rajoy. Since then, the political wheels have been turning at full speed. So far, though, the political deadlock does not appear to have visibly damaged the Spanish economy. Indifferent to all this, economic growth remains at a high level. Since the second half of 2014, strong quarter-on-quarter growth rates have been recorded in each quarter of between 0.6 and 1.0 percent. And for the final quarter of 2016, the indicators available until now signal renewed strong…

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