Economy

France: planned labour market reform goes in the right direction but is not enough

No bin collections, train cancellations and long queues at petrol stations – for weeks France has been suffering the consequences of the strike organised by the trade unions in protest against the planned labour market reform. The French government wants to use measures including the relaxation of employees’ protection against dismissal and more flexible working hours to bring momentum into the labour market and increase employment. The current reform is not the first attempt to stimulate the country’s labour market. Statistics indicate that there is an urgent need for action. The rate of unemployment in France has persistently been close to the 10% mark for many years. Worst affected are young people, starting their careers. Youth unemployment in the country is almost 24%. In 2015, only around 13% of new contracts of employment were permanent. All others were fixed-term contracts of employment and many with a term of less than…

Unemployment falls, but remains the problem in Euroland

In the European Monetary Union (EMU) unemployment has been falling since Q2 2013. The rate has been gradually reduced from over 12 percent to at present 10.2 percent. A large proportion of the new jobs created can probably be attributed to the moderate economic recovery. However, it has not yet become strong enough to drive the rate down to levels prior to the crisis. For this reason, there has only been a very slow decline in the unemployment rate. The turgid unemployment in many EMU member states is also a reflection of a lack of structural reforms. Some of the Eurozone economies have in the recent past introduced structural reforms to their labour markets. On balance, the indicators on labour market flexibility show that deregulation of termination and recruitment regulations has increased the scope in the labour markets of the individual EMU member states. And in response to the severe…

US economy: robust momentum – no less

The US economy started the current quarter with strong momentum, as was evidenced by the data to hand on retail sales and international trade, as well as construction. The rise in industrial production is also particularly positive. After a weak start to the year, the world’s largest economy therefore appears to have returned to its growth path again. Our economic growth forecast for this year is unchanged at around two percent. The situation in the individual economic sectors shows that the US central bank (Fed) definitely has scope at present to raise interest rates. As in previous years, the absence of growth in the first quarter fuelled concerns about the robust nature of the US economy. A look at the last ten years shows that the United States has once again assumed the role of growth driver in the group of developed nations, even after the global financial and economic…

Little ice age almost over at the end of June

Still a disadvantageous risk-reward profile in the equity market for the time being / Delay investment decisions until after 23 June Since the beginning of March the DAX has moved as sluggishly and as sparingly as a bear in winter. The trading range of the German benchmark index was mainly between 9,500 and 10,300 points. The reporting season is over, there is no relevant company news. Only very few investors dare leave cover in view of an imminent Brexit, even though the severe negative factors of the recent past (falling demand from China and the emerging markets, fluctuating currency exchange rates, a collapse in the oil price) have been factored in and a trend towards recovery is visible. The good news is that from the second quarter onwards company reports will be better again. However, earnings growth is only likely to improve at a modest rate, and the above average…

The German housing market is gradually heating up

The strong surge in housing prices continued in Q1 2016. The prices for owner-occupied homes rose on the year by 4.7 percent, the growth rate in multi-family dwellings was even more pronounced, at 8.0 percent. In the big cities, price increases cooled in the interim but have since picked up again, with owner-occupied flats becoming some 9 percent more expensive.  Neither the fact that prices have already rocketed nor the tangible expansion in residential construction were able to dampen the price hike. Four factors have driven this: Firstly, the basic economic conditions for the housing market are better than at most points in the past. Secondly, the interest rate slide results in lower mortgage payments, despite the increase in house prices.  Thirdly, rental returns that can be achieved in the housing market remain a much-sought alternative to the bond market. And fourthly, housing supply is still tight, as, despite the…

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