Germany

German companies rate their current business situation at the highest level in more than five years

After a somewhat bumpy start to the new year, the Ifo Business Climate Index improved again in February, rising from 109.9 points in January to 111.0 points. The previous month’s decline has thus been evened out again for the moment. Companies again viewed their current business situation in a far better light than was the case in their January assessment, with the index climbing from 116.9 points to 118.4 points and thereby marking the highest level since August 2011. This compares with the long-term average for the current business situation which lies at 103.5 points, i.e. way below the current level. The business expectations for the next six months also turned out somewhat more optimistic than in January, improving from 103.2 to 104.0 points. Despite the rising oil price, the approaching Brexit and the possibility of taxes on US imports, industrial companies‘ concerns at the beginning of the year appear…

The superb sentiment among EMU purchasing managers simply persists

The pre-release of the EMU purchasing manager survey for February paints a picture of extraordinarily optimistic sentiment. The purchasing managers polled reported on rampant job creation on a level last seen over nine years ago and of growing order receipts and improving business prospects. However, the rising price pressure can only in part be passed on to customers. The summarised Composite Index for Euroland climbed from 54.4 to 56.0 index points, the highest mark in 70 months. Here, sentiment improved in both industry and the service sector. It is also gratifying that according to Markit the good sentiment has also spread to economies over and above the two large EMU member states of France and Germany. In February, German purchasing managers were extremely upbeat. The sentiment index for industry climbed from 56.4 to 57.0 index points and thus hit a high for the last 69 months, indicating that German industry…

Growth in credit markets in Germany expected to accelerate

Last year, the surge in growth in Germany’s credit markets seen from the end of 2015 onwards stabilised and intensified. Corporate and private households’ bank debts rose 2.7 percent to EUR 2,372.3 billion. In other words, the usually sluggish trend of past years was at long last overcome. Private property financing was again the growth driver. With stronger new building activity and increasing demand, as well as rising prices in the property markets, the need for credit grew appreciably. Demand was also buttressed by extremely favourable financing terms. The only thing preventing even more buoyant growth was the translation of the EU Mortgage Credit Directive into German law, which led to stricter regulations for loan approvals above all for senior citizens and young families. The trend for corporate credit was also gratifying: From 2013 to 2015 this market segment saw only weak, indeed usually negative change rates. However, in 2016…

The return of inflation – equities are an imperative

Inflation has been picking up worldwide for some months now. For example, the price hike in the USA recently reached 2.5%, the highest figure since 2012. In Germany, prices rose by 1.9% as at the end of January – a level last seen in 2013. It is not really surprising that the buzzword of “reflation”, meaning the return of inflation, triggered both by monetary and fiscal policy hitting a more expansionary gear and by rising commodity prices, is doing the rounds again. Specifically German citizens are disproportionately exposed to such fears, not least owing to the negative reports on hyperinflation in Germany just short of a century ago. For many years, dividend-bearing securities had the reputation of being inflation-proof investments. However, were the suitability of equities as a hedge against inflation to be true, then price trends for shares in periods of high inflation should be correspondingly better than at…

German property market: The strong price surge in 2016 weakened in the fourth quarter

The property price index that has just been released for Q4 2016 by the Association of German Pfandbriefbanken (Verband deutscher Pfandbriefbanken) proves in black and white what had already started to become clear in the course of the year: With an increase of exactly 6 percent, last year posted the strongest price rise for owner-occupied homes since the index was first launched in 2003. The upturn was slightly weaker for prices in detached and semi-detached houses, at 5.8 percent, while that for owner-occupied flats was a little greater at 6.5 percent. The pronounced increase not only shows that the price trend picked up pace quite significantly, in the wake of an increase of 4.5 percent in 2015 and of a good 3 percent in each of the four prior years. But also that, buttressed by a low rate of inflation of not even half a percent, the real price of…

German economy remains solid

The German economy is growing at a solid pace. However, the gross domestic product (GDP) data and the ZEW’s economic expectations published today would imply that it is not expected to accelerate further for the time being. While GDP gained 0.4 percent in the final quarter of 2016, the economic expectations of the financial analysts surveyed by the Mannheim-based ZEW are somewhat more sceptical for the months ahead. The pace of macroeconomic growth picked up again in the second half of 2016. Having increased by only +0.1 percent q-o-q in the third quarter, the growth rate climbed to +0.4 percent in the fourth quarter. Although this is minimally weaker than expected ahead of the analysts‘ consensus (+0.5 percent), it is nonetheless a solid result. Annualised, growth was still 1.7 percent at the end of last year. The domestic economy provided positive growth impetus at the end of 2016: public consumption…

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