Germany

Eurozone economy in good shape, Trump gives no cause for concern

The preliminary release of the results of the purchasing manager’s survey in the EMU reveals a visible improvement in sentiment among European purchasing managers in November. The Composite Index has risen from 53.3 to 54.1 index points, marking the highest level in 11 months. Largely responsible for this gain is the services sector which registered a renewed strong increase from 52.8 to 54.1 index points. In the manufacturing sector, only a slight gain was noted of 0.2 to 53.7 index points. The purchasing managers claim that new orders are on the rise. This has resulted in higher order volumes and the second-largest boost to employment since February 2008. At this juncture there cannot be any talk of a deterioration in sentiment due to the unexpected outcome of the US presidential election. The sentiment barometers reveal no signs of a negative „Trump effect“. If anything, the Eurozone economy is far likelier…

DZ BANK Research Outlook for 2017

Fiscal policy will stimulate the global economy, but growth will remain fragile / central banks not more expansionary / stock markets with moderate upside potential The global economy will only slowly pick up pace in 2017. It will be bolstered by increasing fiscal-policy stimuli. Inflation will edge up above all owing to the energy-price-related baseline effect. Thus, there will be no talk of an even more expansionary monetary policy. Interest rates will remain very low, especially in the Eurozone. The existing lack of appealing investment opportunities in combination with the global economy’s slightly brisker growth will also boost the stock markets. The DAX should close 2017 at around 12,000 points. The global economy is estimated to grow by 3.0 percent in the coming year, whilst 2.8 percent is expected in the current year. Growth worldwide continues to not be very dynamic. Some countries will try and use fiscal programmes to…

Construction permits: despite a sharp rise, still failing to match demand for new housing

In mid-November, the Federal Statistical Office published new figures on permits for residential construction in Germany. They show that in the first three quarters of the current year permits rose by a considerable 24% to around 276,300 compared with the same period in the previous year. This is a positive development, as the shortage of properties is contributing to the rapid rise in property prices in many Germany conurbations. Despite this, residential construction still lags demand for new housing. Should the current trends continue, we can count on 370,000 residential construction permits for 2016 as a whole. Completions are likely to increase by some 9% to 270,000 residential units, meaning that residential construction remains well below the figure of 400,000 homes per year, which are required according to property experts. The longer the trend persists, the greater the number of homes which will have to be built in the years…

Financial stability given the stress of low interest rates

The Financial Stability Report recently published by Deutsche Bundesbank can be read to say that there is no acute threat to financial stability at present, but there are indeed a series of risks that bear monitoring. We share this assessment. From our viewpoint, the extremely low interest rates (for which the ECB is partly responsible given its monetary policy) are among the single greatest dangers to the stability of the financial markets in both Germany and Europe. The consequences of low interest rates include massive forfeited interest income on the part of citizens, something that makes establishing provisions for old age difficult. Another impact is the huge bottleneck in financial investments that can be seen from the fact that already one quarter of private monetary assets are parked in sight deposits and cash. Life insurers are also busy hunting for profitable investments, and are finding it ever harder to generate…

German economic growth weakens slightly in the third quarter, but domestic demand remains robust

The growth in Germany’s gross domestic product shifted down another gear in Q3 2016. Having increased by +0.4 percent in the second quarter, macroeconomic output between July and September only rose by +0.2 percent. As is customary with flash estimates, no exact details have been released on the development of the individual components. According to data from the German Federal Office of Statistics, foreign trade environment acted as a brake, as exports contracted slightly, while imports climbed somewhat. As in past quarters, the key pillars of growth were government and private consumer spending. Construction investments probably also edged up, with by contrast less being invested in plant and equipment. In the wake of a strong opening to the year with growth at +0.7 percent and a robust Q2 performance, the largest economy in Europe is running slightly out of steam. It is no great surprise that there is now no…

US – good employment situation but hardly any sign of wage pressure

All in all, the employment situation in the United States is very good. The rate of unemployment has halved since the end of 2010 and the average number of unemployed persons in 2016 is likely to have fallen below the eight million mark again for the first time since 2007. In the course of the current year, as in previous years, we are seeing very moderate wage increases only, despite the quite good situation meanwhile on the labour market. Wage momentum appears to be capped by the sustained intake of returnees. Based on our calculations, the influx from the hidden reserves will continue next year too. We anticipate an unemployment rate of 4.8 percent next year and wage increases of around two and a half percent. Nonetheless, the reduction in unemployment and hence the decline in the unemployment rate is likely to progress at a somewhat slower pace than in…

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