Germany

Euroland purchasing manager indices: Industry brakes and surveys point to ongoing muted growth

On balance, the sentiment amongst European purchasing managers has brightened slightly in February. The Composite Index rose from 51.0 to 51.4 points, which in the wake of the latest falls corresponds to the highest level in three months. The improvement can be attributed solely to the service sector, where the sentiment barometer rose. The yardstick for manufacturing lost ground, by contrast, and at 49.2 points it is not only below the growth threshold of 50, but also the lowest figure in five years and eight months. Production decreases, dwindling demand and declining export business are all impairing sector sentiment. Judging by the survey results, the Euroland upturn should continue although the growth rates will presumably remain muted. The preliminary figures released on February sentiment among German purchasing managers painted a mixed picture. The Composite Index for Germany edged up from 52.1 points in January to 52.7 in February. However, this…

US threats of customs tariffs hang like the sword of Damocles over German carmakers’ necks

On 25 July last year, European Commission President Juncker persuaded US President Trump not to impose punitive tariffs on automobiles. Of late, there has been growing concern about US tariffs on European cars. The US Department of Trade could classify the import of cars and automotive parts as constituting a threat to America’s national security and therefore, from the US point of view, lay the foundations for introducing customs tariffs. The German car industry has in recent years definitely performed gratifyingly. And that despite the diesel scandal and the threat of a few major German cities imposing bans on certain vehicles. However, the car industry’s fortunes have recently shown signs of braking. In 2018, orders from elsewhere in Europe sagged by over seven percent. Within Germany, things were not much better, with a decline of over four percent. Only order receipts for German cars from outside Europe continued to rise…

German economic stagnation in the final quarter 2018

The German economy failed to gain momentum at the end of 2018. Gross domestic product stagnated in the final quarter, with stable private consumption, spending-happy public budgets and the positive trend in investments just about managing to compensate for the weak industrial figures. All in all, economic activity proved very disappointing in the second half of 2018 compared with the brisk first half-year. International factors, such as the US-Chinese trade dispute, the Brexit uncertainty and political squabbling in Europe, had a negative impact here as much as the domestic problems surrounding the automobile industry (diesel problems and new emission standards) and the consequences of the low water levels. Even if these special problems are probably in the process of being resolved, no major leaps in growth are to be expected at the beginning of 2019. Companies are taking a sceptical view to the coming months and, given the many risk…

German housing market: Record price increases in 2018

Anyone who has bought a house or apartment in recent years can expect to see a respectable growth in the value of their property. According to price data recently published by the Association of German Mortgage Banks (Verband deutscher Pfandbriefbanken), the price of owner-occupied residential property rose by a record 7.7% in 2018 alone (annual average across Germany). After deducting inflation, real value growth pans out at almost 6%. As the situation was pretty much the same in previous years due to the meanwhile low inflation, the cumulative real value growth over five years adds up to more than 20%. If the property is located in one of the seven largest German cities, the nominal price increase in 2018 was even two percentage points higher. However, inflation has appreciably decelerated in the course of the year and was unable to keep up with the nationwide growth pace in the third…

Sobering quarterly results for economic growth in the eurozone

The dip in economic growth in the eurozone carried over to the fourth quarter of 2018. Economic growth compared to the previous quarter remained at a feeble 0.2%. Concerns about a possible hard Brexit, new EU exhaust emission standards and smouldering international trade disputes held back most of the national economies in the currency area. In particular the three largest eurozone countries – Germany, France and Italy – slowed down in terms of economic growth. The cyclically weaker second half of 2018 in the eurozone also dragged down the annual average noticeably: following macroeconomic growth of 2.4% for 2017, growth last year was only 1.8%. The outlook for the current year is similarly cautious. The climate in the private sector just recently has only been “slightly optimistic”, stating it cautiously. Based on this assumption we are likely to see a cooling of economic growth to about 1% for the 2019…

Euroland: Slightly weaker growth in corporate loans in final-quarter 2018

According to figures from the European Central Bank, in 2018 corporate loans in Euroland grew just short of 4 percent. In other words, the rise in loans portfolios, after adjusting for sales, securitisation and fictitious cash pooling activities, slowed slightly in the fourth quarter of last year. However, the trend differed greatly from one country to the next. While corporate loans in Germany surged 6.4 percent, the highest rate in almost ten years, they actually fell in Spain. In France, growth in Q4 2018 slowed mildly, while it dipped appreciably in Italy. Loans to private households also developed unevenly, with the overall pace for Euroland picking up slightly to reach 3.3 percent. All in all, the trend last year was gratifying: The European loans markets, which suffered from 2012 to 2015 from a decline and/or weak growth, benefited from high demand for credit among corporations and private households alike. In…

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