Germany

Very good sentiment in the crafts trade, but the sector still faces challenges

Sentiment in the crafts trade is good. According to the German crafts trade federation (ZDH), the year started off very well for the skilled trades sector which employs one eighth of all wage earners in Germany and more than one quarter of young persons in vocational training. In the first quarter 2017, new records were broken in the areas of revenue and employment as well as business conditions and investments. The main contributions to this development came from the building and interior finishes trades that are profiting from the consistently strong demand for housing and real estate in metropolitan areas. However, the encouraging news should not blind us to the many major challenges still facing the German crafts trade. These include successor problems, competition from industry and foreign suppliers as well as mounting demands in connection with technical progress. However, the main source of concern is the growing shortage of…

Dairy farmers benefit from rising prices – initially

Milk prices have risen steeply in Germany since mid-2016. In March the “ife Rohstoff Milch” indicator, which is regularly published by the Kiel-based Institut für Ernährungswirtschaft (ife) and which is derived from butter and skimmed milk powder prices, was 52% above the figure of the previous year. This – in combination with low feed prices –improves business conditions for dairy farmers significantly. The year-to-date decline in European milk production and the dynamic increase in the consumption of higher-fat dairy products (fats market) are causing the butter price to increase very steeply. But in the protein market the price of skimmed milk powder (SMP) has fallen significantly due to the adequate supply. So far, the volume of milk produced has fallen not only in Europe, but also in the other important exporting countries such as Australia and New Zealand. Milk output has only increased in the USA because of the good…

ECB’s monetary policy is heightening the pressure on banks

The monetary measures of the European Central Bank (ECB) are increasingly burdening the profits of banks in Germany and Europe. This is revealed in the ECB’s Bank Lending Survey for April on the lending business of banks. While the extended asset purchasing programme of the Eurosystem has directly or indirectly improved the liquidity position and financing conditions of banks in the last six months, the improvements in Germany resulted primarily from clients‘ cash asset reallocations into bank deposits and to a lesser extent from the sale of banks‘ own securities. However, a significant majority of the institutions surveyed in Europe also reported contracting net interest margins and a deterioration in the overall earnings situation of banks. The reduction in lending rates, boosted by the asset purchasing programme, has particularly contributed to this development. The average European effective interest rate on new business with corporate clients fell in February to a…

Germany needs to invest more in R&D

Research and development play a decisive role precisely in economies short on commodities, such as Germany. To secure qualified jobs and thus income levels and prosperity in the international competition between economic hubs, what is required is a broad-based, efficient R&D industry that “produces” ideas and develops them into new products and technologies. Indeed, in the past the inventiveness of German researchers and developers has repeatedly seen success on the market. In recent years, research activities have in fact been tangibly boosted. Thus, Germany swiftly achieved the target level for research expenditure of three percent of gross domestic product at an early date. On a European comparison, the German economy is not only well positioned as regards research intensity, but also as regards research, development and marketing successes, as is borne out by patent filings and exports of high-tech goods. However, innovation cycles are growing ever shorter and international competition…

Purchasing managers’ indices signal a good start for the second quarter

Sentiment among European purchasing managers points towards a sound economic backdrop in the European Monetary Union. According to today’s advance release based on around 85 percent of the answers of the purchasing managers surveyed, the trend barometers not only remain at a high level but could even come in slightly above the high March values. This is reflected in the comprehensive composite purchasing managers’ index, which encompasses the sentiment in the entire private economy. It improved once again by 0.3 points to 56.7 index points in April, which is the highest level in the last 72 months. Both the services and the manufacturing sector reported an improvement in sentiment. With regard to individual countries, better sentiment figures in France and the other countries more than compensated for the slight deterioration of sentiment among the German purchasing managers at a high level. According to the survey results, the monetary union’s economic…

ECB monetary policy braced for a trend reversal

The sentiment indicators in the Eurozone are in a celebratory mood. Both the purchasing managers‘ indices as well as the business climate indicators are signalling an acceleration in economic pace in the Eurozone in the months ahead. The recovery is evidently not just restricted to certain countries, with quite a few EMU member states recently delivering robust economic signals. The upswing in the Eurozone thus appears to be gaining a broader base. This encouraging development might be attributed to a slight acceleration in global economic activity. A slightly higher oil price and a still very stable economic development in China are also contributing towards this trend. The spectre of deflation, that had kept market players and central bankers in suspense last year, has receded in response to a strong increase in European inflation rates. Inflation pressure remains low, but the latest positive developments regarding the economy and inflation are creating…

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