Germany

German economy under pressure

The economy in Germany deviated from its growth course in the spring of 2019. Between April and June, economic output fell slightly by 0.1 percent compared with the previous quarter. At the beginning of the year, growth was still 0.4 percent. The decisive factor was the international burdens, which were mainly affecting German industry. The Federal Statistical Office reported that German exports fell more sharply than imports in the past quarter, which slowed the economy. In addition, construction investments declined, but this was mainly due to a special statistical effect. Overall, the construction industry continues to perform well and is supporting economic development. In the past quarter, positive impetus came from private consumer spending, which continued to grow. With high employment and rising incomes, the environment for consumption remains favorable. The state has also increased its consumer spending. Despite the uncertain global situation, companies increased their capital expenditure. This shows…

German housing market: Prices are rising rapidly nationwide, high level in metropolises is slowing down

Prices on the German housing market continue to rise briskly. Since the end of 2017, residential property prices in Germany have risen by around 7% a year. The price increase in this order of magnitude also failed to materialise in mid-2019. The price index just published by the Association of German Pfandbrief Banks (vdp) showed a growth rate of 7.3% year-on-year at the end of the second quarter. This means that the expected slowdown in inflation has failed to materialise. However, last year’s forecast was based on the turnaround in interest rates that was becoming apparent at the time. Instead, mortgage interest rates continued to fall – as a result of the slowdown in the European economy and the weak inflation trend. The average interest rate calculated by the Bundesbank for housing loans in new business fell to 1.57%, the lowest level to date. This means that the purchase of…

More savings in Germany

The environment for private household investment in Germany remains difficult. While the ECB’s announcement in September last year that it would phase out its net bond purchases in stages still raised hopes that the low-interest phase would subside, these hopes evaporated again at the turn of the year. With the slowdown in economic growth in Germany and Europe and the intensification of the trade conflict between the USA and China, monetary policy normalization receded into the distance. The average current yield on fixed-interest securities has been falling for months – with a negative sign since June. While expansive monetary policy and low interest rates are pushing up demand for equities as an investment alternative, trade disputes and a gloomy economic outlook are weighing on the sales and earnings prospects of listed companies. This limits price potential and increases volatility. In the first quarter of the current year, private households once…

A higher national debt would even make sense now

The black zero in Germany is wobbling. Expenditure wishes and revenue expectations are diverging more and more. The burdens are coming from both sides. As the economy weakens, tax revenues will decline in the long term, while spending expectations will continue to rise. Even last year there was a comfortable surplus: In the overall public budget, revenues in 2018 were almost 54 billion euros higher than expenditure. And this despite the fact that last year government spending grew more strongly than tax revenues. I am actually a great friend of a balanced budget for states, especially against the background of intergenerational justice. This, however, is currently being made absurd. The Federal Government can currently go into debt with negative interest rates. Increasing indebtedness does not, therefore, lead to a burden on future generations. Assuming a positive return on investment in growth and employment, today’s rising debt would also have a…

The baby boomers are coming

  In Germany, there have been two major states of emergency for some time now. One is Europe and why Germany needs the euro, the other revolves around the consequences of demography for society and the welfare state. The latter is what we are talking about here. The consequences of the demographic development can be mitigated by more immigration and a sensible immigration law, higher investments and increasing productivity. This will require a noticeably higher equity ratio in private portfolios and housing subsidies tailored to demand. Even if the new population projection by the Federal Statistical Office is somewhat more optimistic. The basic problem of an ageing society with too few children remains. In around ten years‘ time, when baby boomers will gradually retire, the change in age structure will accelerate dramatically. The baby boomers, who today still contribute as skilled workers to the production of goods and services, pay…

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…

1 2 40