Germany

Growth in the credit markets continues, but loses steam

Not just in Germany, but throughout Euroland, the economic cycle has been slowing. In Germany, demand for loans nevertheless continued to be positive last year: At the end of September corporate non-housing-construction loans hit a growth rate of 6.7% on September 2017, the highest rate in a decade. Housing-construction loans to companies and private households each rose strongly in 2018, by about 5% on the year, with only consumer loans making little progress. However, in the final quarter of 2018 there were first signs that growth was possibly slowing. Corporate non-housing-construction loans did not succeed in maintaining their record growth pace of the previous quarter and this was evidenced above all in export-focused manufacturing. In Euroland, growth in corporate loans also slowed. While the pace of growth almost halved for Italian corporate loans, in Spain it actually slid well into negative territory. The majority of both German and European banks…

Success of online shopping leading to a transformation in the retail sector

Retail is not a strong-growth sector; growth in the sector is achieved almost exclusively through price concessions or by gaining market share to the detriment of competitors. In addition, the trend towards online shopping is leading to major changes in the industry. A significant share of sales growth in the last few years went not to bricks-and-mortar stores, but rather to online shops. More than one in ten euros is now spent online. In addition, not all retail segments have benefited equally from the rise in demand in the last few years. The sales revenues of DIY stores and department stores in real terms are currently well below their level in 2008. The situation hardly looks any better for department stores, even if we include the price trend. In nominal terms, supermarkets have seen the best performance in the last ten years. However, their growth can be largely ascribed to…

Euroland inflation rate: Hardly any movement on the price front

The Euroland inflation rate remained modest in February. The flash estimate shows that the price increase last month was 1.5 percent on the year. In January, the inflation rate had been 1.4 percent. A higher price rise was seen in the energy component and unprocessed foods, whereas the increase in service sector prices waned. Pricing pressures in the domestic economy remain moderate, as the core rate held steady at 1.2 percent. The Eurozone thus continues to be some way away from the ECB’s inflation target of “below but close to 2.0 percent” and this looks set to remain the case for the year as a whole. At the country level, the economies that have already issued flash estimates on price trends likewise exhibited little upward momentum. In Germany, the Harmonised Index of Consumer Prices (HICP) stayed unchanged at 1.7 percent, in France, the figure edged up from 1.4 to 1.5…

Ifo survey: No improvement in sight yet; sixth consecutive decrease

Sentiment in corporate Germany dimmed for the sixth consecutive time in February. This is shown by a current ifo-Institut survey. The deterioration was especially pronounced as regards companies’ assessment of the current business situation, which is now at the lowest level in two years. That said, expectations for the coming months also continued to head south. The international strains quite evidently still impact more negatively on corporate Germany than the overall good situation on the domestic market does positively. The German economy’s strong gearing to exports has a negative effect in such a setting. The reliance on foreign trade that provides an additional boost in periods when the global economy blossoms is now braking German industry. Finally, no solution to Brexit is in sight. And the US President’s threats of customs tariffs will presumably have caused additional uncertainty among carmakers over the last few days. One positive sign for the…

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…

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