More good news. The German economy continues surfing on the waves of optimism. Today’s Ifo index fits perfectly into the set of positive and encouraging latest macro data. Germany's most prominent leading indicator, measuring business sentiment, increased to 107.5 in August, from 106.2 in July. Both, the expectation and the current assessment component improved, providing further signs that fears of a sharp slowdown in the second half of the year should have been overdone.
To the contrary, prospects for the German economy remain good. The gradual filling of order books since the beginning of the year combined with some inventory reductions bodes well for industrial production in the coming months. Moreover, the recoveries of the US and UK economies, signs that the Chinese landing is a soft rather than a hard one and the tender stabilization of the Eurozone economy should support German exports. At the same time, with the wage increases of the last two years and record-low unemployment private consumption should also remain an important growth driver. The great unknown for the German growth outlook is private investment. The increase in the second quarter was welcome news but it is too early to tell whether this investment recovery is here to last.
With the economy cruising along rather smoothly, all eyes will move to the upcoming elections on 22 September. Latest opinion polls show that the result of the elections is still far from certain. In fact, it could become a neck-and-neck race between the current coalition (Angela Merkel’s CDU and her liberal coalition partner) and the two major opposition parties (the social-democrats with Merkel’s challenger for the chancellery, Peer Steinbrueck, and the Green Party). According to latest polls, Merkel’s coalition enjoys a lead of around 5 percentage points but does not have enough votes to form the next government. So far, the election campaign has been rather dull. This should change in the next weeks. However, with the latest economic data, it will be very hard to make Germany’s economic performance part of the campaign. Contrary to a famous campaigning slogan from Bill Clinton, it is not the economy which will decide the German elections, stupid...
Tuesday, August 27, 2013
Thursday, August 22, 2013
German economy powering ahead
Today’s PMIs provide further evidence that the German economy is rather gaining than losing momentum. The flash composite index increased to 53.4 in August, from 52.1 in July; its highest level since January. PMI services increased to 52.4, from 51.3, while the PMI manufacturing improved 52.0, from 50.7 in July. The PMI manufacturing currently stands at its highest level in more than two years.
After the strong second quarter, many observers had predicted a quick slowdown of the German economy in the second half of the year. Up to now, it looks as if the economy is gaining rather than losing momentum. German confidence is not only benefitting from strong domestic economic activity and hopes of a soft and not a hard landing of emerging economies but also from the latest improvements in the Eurozone. It looks as if new growth hopes for the rest of the Eurozone are stimulating German confidence, which in turn could lead to higher German economic growth and could eventually become growth-supportive for the Eurozone. Obviously, it is far too early to call this the beginning of a virtuous circle but the current positive – at least psychological – interaction between Germany and its Eurozone peers could set off positive knock-on effects.
Turning back to the German economy, today’s PMIs indicate that the Eurozone’s biggest economy is powering ahead. The expected slowdown after the exceptionally strong second quarter should be mild. Against the background of strong economic growth, the latest excitement in the German election campaign could also quickly disappear again. As long as most Germans are not personally affected by the euro crisis, disgust about a possible third bailout package for Greece should, in our view, abate quickly.
Tuesday, August 13, 2013
Germany's strong growth comeback
Popping the corks. The German economy has staged an
impressive comeback in the second quarter of this year. According to the
first estimate of the German statistical office, the economy grew by
0.7% QoQ. After a downward revision, the economy now stagnated in the
Q1. On the year, German GDP is up by 0.9%. The individual growth
components will only be released on 23 August but available monthly data
and the statistical office’s press release suggest that growth was
broadly driven by consumption, net exports and investment, with the
catching up of the construction sector playing an important role.
Today’s GDP numbers mark the end of a long rollercoaster ride of the German economy. Since the start of the year, German macro data has been highly erratic. Harsh and persistent winter weather, early Eastern, public holidays and vacation frequently blurred the data. While Q1 figures understated the real strength of the economy, today’s numbers are somewhat too exaggerated. Looking ahead, the German economy should settle down to a growth rate of around 0.4% QoQ in the second half of the year. Such a growth path would be consistent with continued solid consumption driven by low unemployment, a further pick up of the US and UK economy and a soft landing of the Chinese economy.
The biggest domestic challenge remains weak investment. Despite very favourable financing conditions and strong international positions of many German companies, domestic investment has been sluggish for a longer while. Reasons behind the weak investment performance have been a preference for foreign rather than domestic investments in the private sector and a significant reduction of public investments. One way or the other, the next German government will have to address the issue of domestic investment to ensure Germany’s leading economic role.
At least for the time being, the German economy has returned as the big stronghold, not only for the Eurozone but this time around even for the global economy. Up to now, Germany has outperformed most of its G7 peers, at least in the second quarter. For the Eurozone, this morning’s numbers are also good news. Thanks to Germany, the entire Eurozone should have left the record-long recession. Of course, the Eurozone still has a long way to go before positive growth numbers can honestly be called recovery but relief should stand above skepticism, at least for one day.
Today’s GDP numbers mark the end of a long rollercoaster ride of the German economy. Since the start of the year, German macro data has been highly erratic. Harsh and persistent winter weather, early Eastern, public holidays and vacation frequently blurred the data. While Q1 figures understated the real strength of the economy, today’s numbers are somewhat too exaggerated. Looking ahead, the German economy should settle down to a growth rate of around 0.4% QoQ in the second half of the year. Such a growth path would be consistent with continued solid consumption driven by low unemployment, a further pick up of the US and UK economy and a soft landing of the Chinese economy.
The biggest domestic challenge remains weak investment. Despite very favourable financing conditions and strong international positions of many German companies, domestic investment has been sluggish for a longer while. Reasons behind the weak investment performance have been a preference for foreign rather than domestic investments in the private sector and a significant reduction of public investments. One way or the other, the next German government will have to address the issue of domestic investment to ensure Germany’s leading economic role.
At least for the time being, the German economy has returned as the big stronghold, not only for the Eurozone but this time around even for the global economy. Up to now, Germany has outperformed most of its G7 peers, at least in the second quarter. For the Eurozone, this morning’s numbers are also good news. Thanks to Germany, the entire Eurozone should have left the record-long recession. Of course, the Eurozone still has a long way to go before positive growth numbers can honestly be called recovery but relief should stand above skepticism, at least for one day.
Peer Steinbrueck en Die Aerzte
Een van mijn muzikale klassiekers is 'Zu spät' (te laat) van de
Berlijnse rockband Die Ärzte. Het is een lied over wraak na een versmade
liefde. De droom van elke underdog, ooit laat je alle vernederingen en
blamages achter je en laat je de hele wereld je grootsheid zien. Het is
een lied dat op dit moment de gemoedstoestand van Peer Steinbrück, de
politieke uitdager van bondskanselier Angela Merkel, goed weergeeft.
Een blik op de Duitse verkiezingscampagne laat zien dat het voor Steinbrück en zijn SPD niet meezit. Integendeel. Het zit eigenlijk vies tegen. Alles wat mis kan gaan, gaat mis. De eerste verkiezingsposters bleken niet bestand tegen regen. De tweede oplage die weer en wind trotseert, is een wanhopige poging om Merkel onder de gordel te raken, maar bereikt het tegendeel. Duitsland houdt niet van 'negative campaigning'. Daarnaast brak afgelopen week een goed bedoelde documentaire over Steinbrück op de Duitse buis het record weg-zappers. En tot overmaat van ramp voor de SPD, heeft de regering van Merkel voor het eerst sinds de verkiezingen in 2009 weer de meerderheid in de opiniepeilingen.
De verkiezingen lijken voor Steinbrück en zijn SPD al een gelopen race. Maar dat hoeft zo niet te zijn. De grote afrekening komt pas op 22 september en Steinbrück heeft nog steeds kansen om zich te ontpoppen van lachnummer tot verkiezingswinnaar.
Hoe dan? Met hulp van de één derde nog onbesliste zwevende Duitse kiezers. Een groot deel van die kiezers heeft in het verleden al eerder SPD gestemd. Zij vormen een groot overwinningspotentieel. Of die mensen met een anti-Merkelcampagne naar de stembussen kunnen worden gelokt, is twijfelachtig. Als Steinbrück wil winnen, zal hij zijn campagne moeten omgooien. De tactiek van zijn campagne is nu Angela Merkel persoonlijk aan te vallen. Dat zal niet werken. De Duitsers houden te veel van Angie. Steinbrück kan alleen verschil maken op inhoud. Waarom presenteert hij zich niet als duidelijk alternatief voor een ander beleid? Bijvoorbeeld als voorstander van een Griekse schuldkwijtschelding na de verkiezingen? Of een tweede Portugese reddingspakket met afschrijvingen bij particuliere obligatiehouders? Of als iemand die ziet dat de sterke Duitse economische groei van het moment snel verdwijnt als de grote investeringsachterstand niet snel wordt weggewerkt. Waarom pleit Steinbrück niet voor een initiatief voor publieke en particuliere investeringen in bijvoorbeeld infrastructuur, energie, scholen en kennis? Het lijkt wel alsof Steinbrück niet durft te winnen.
In het lied van Die Ärzte wordt de sukkel later een superheld, die de harten van alle meisjes breekt. Een hartenbreker zal Steinbrück niet meer worden, maar met meer durf kan hij zeker nog zes weken van een verkiezingsoverwinning blijven dromen.
Deze column verscheen vandaag in het Belgische dagblad "De Tijd"
Een blik op de Duitse verkiezingscampagne laat zien dat het voor Steinbrück en zijn SPD niet meezit. Integendeel. Het zit eigenlijk vies tegen. Alles wat mis kan gaan, gaat mis. De eerste verkiezingsposters bleken niet bestand tegen regen. De tweede oplage die weer en wind trotseert, is een wanhopige poging om Merkel onder de gordel te raken, maar bereikt het tegendeel. Duitsland houdt niet van 'negative campaigning'. Daarnaast brak afgelopen week een goed bedoelde documentaire over Steinbrück op de Duitse buis het record weg-zappers. En tot overmaat van ramp voor de SPD, heeft de regering van Merkel voor het eerst sinds de verkiezingen in 2009 weer de meerderheid in de opiniepeilingen.
De verkiezingen lijken voor Steinbrück en zijn SPD al een gelopen race. Maar dat hoeft zo niet te zijn. De grote afrekening komt pas op 22 september en Steinbrück heeft nog steeds kansen om zich te ontpoppen van lachnummer tot verkiezingswinnaar.
Hoe dan? Met hulp van de één derde nog onbesliste zwevende Duitse kiezers. Een groot deel van die kiezers heeft in het verleden al eerder SPD gestemd. Zij vormen een groot overwinningspotentieel. Of die mensen met een anti-Merkelcampagne naar de stembussen kunnen worden gelokt, is twijfelachtig. Als Steinbrück wil winnen, zal hij zijn campagne moeten omgooien. De tactiek van zijn campagne is nu Angela Merkel persoonlijk aan te vallen. Dat zal niet werken. De Duitsers houden te veel van Angie. Steinbrück kan alleen verschil maken op inhoud. Waarom presenteert hij zich niet als duidelijk alternatief voor een ander beleid? Bijvoorbeeld als voorstander van een Griekse schuldkwijtschelding na de verkiezingen? Of een tweede Portugese reddingspakket met afschrijvingen bij particuliere obligatiehouders? Of als iemand die ziet dat de sterke Duitse economische groei van het moment snel verdwijnt als de grote investeringsachterstand niet snel wordt weggewerkt. Waarom pleit Steinbrück niet voor een initiatief voor publieke en particuliere investeringen in bijvoorbeeld infrastructuur, energie, scholen en kennis? Het lijkt wel alsof Steinbrück niet durft te winnen.
In het lied van Die Ärzte wordt de sukkel later een superheld, die de harten van alle meisjes breekt. Een hartenbreker zal Steinbrück niet meer worden, maar met meer durf kan hij zeker nog zes weken van een verkiezingsoverwinning blijven dromen.
Deze column verscheen vandaag in het Belgische dagblad "De Tijd"
Wednesday, August 7, 2013
Industrial production points to strong growth comeback of German economy
Impressive comeback. The German economy is on a good way
towards an impressive growth comeback in the second quarter. Industrial
production increased by 2.4% MoM in June, after an 0.8% MoM drop in May.
The increase in production was broadly-based across all sectors.
Production in the construction sector increased by 1.6% MoM. Compared
with 1Q 13, industrial production was up by 3.4% in 2Q.
Slowly but surely industrial activity has returned as an important growth driver for the German economy. Since the turn of the year, inventories have remained rather stable, while new orders have gradually picked up. Moreover, the construction sector has staged – the expected – comeback after the harsh winter. Yesterday’s new order data confirmed that the industrial engine will not run out of fuel any time soon. A monthly increase by almost 4% was rather impressive. In fact, improving new orders is not a one-off. Order books have gradually thickened over the last six months with a quarterly increase of 0.5% QoQ in 1Q 13 and 1.2% QoQ in 2Q.
It looks as if the German economy is again walking on two feet: solid private consumption and strengthening industrial activity. Looking ahead, the biggest short- and medium-term risks for the German economy seem to stem from a further softening of economic activity in emerging economies, above all China, and a longer-lasting economic slump in Germany’s main trading partner: France.
Moreover, another pressing issue for the German economy is weak domestic investment. Yesterday, in its latest Article IV report, the IMF linked weak domestic investment to the euro crisis and falling German exports to Eurozone peers. In our view, there is more to German investment weakness than the euro crisis. In fact, weak domestic investment is not only a recent phenomenon but has been accompanying the German economy for much longer, driven by a preference for foreign rather than domestic investments in the private sector and a significant reduction of public investments. One way or the other, the next German government will have to address the issue of domestic investment to ensure Germany’s leading economic role.
With this week’s data a long rollercoaster ride of the German economy is coming to an end. Since the start of the year, German macro data has been highly erratic. Harsh and persistent winter weather, early Eastern, public holidays and vacation frequently blurred the data and required an extra portion of gut feelings to look through short-term fluctuations. The month of June was the first noise-free month; the month of truth. Data released so far has been very promising, sending two messages: i) the German economy should have staged an impressive growth comeback in the second quarter (with growth somewhere between 0.6% and 0.8% QoQ); and ii) such a comeback could be sufficient to have pushed the entire Eurozone out of the recession.
Slowly but surely industrial activity has returned as an important growth driver for the German economy. Since the turn of the year, inventories have remained rather stable, while new orders have gradually picked up. Moreover, the construction sector has staged – the expected – comeback after the harsh winter. Yesterday’s new order data confirmed that the industrial engine will not run out of fuel any time soon. A monthly increase by almost 4% was rather impressive. In fact, improving new orders is not a one-off. Order books have gradually thickened over the last six months with a quarterly increase of 0.5% QoQ in 1Q 13 and 1.2% QoQ in 2Q.
It looks as if the German economy is again walking on two feet: solid private consumption and strengthening industrial activity. Looking ahead, the biggest short- and medium-term risks for the German economy seem to stem from a further softening of economic activity in emerging economies, above all China, and a longer-lasting economic slump in Germany’s main trading partner: France.
Moreover, another pressing issue for the German economy is weak domestic investment. Yesterday, in its latest Article IV report, the IMF linked weak domestic investment to the euro crisis and falling German exports to Eurozone peers. In our view, there is more to German investment weakness than the euro crisis. In fact, weak domestic investment is not only a recent phenomenon but has been accompanying the German economy for much longer, driven by a preference for foreign rather than domestic investments in the private sector and a significant reduction of public investments. One way or the other, the next German government will have to address the issue of domestic investment to ensure Germany’s leading economic role.
With this week’s data a long rollercoaster ride of the German economy is coming to an end. Since the start of the year, German macro data has been highly erratic. Harsh and persistent winter weather, early Eastern, public holidays and vacation frequently blurred the data and required an extra portion of gut feelings to look through short-term fluctuations. The month of June was the first noise-free month; the month of truth. Data released so far has been very promising, sending two messages: i) the German economy should have staged an impressive growth comeback in the second quarter (with growth somewhere between 0.6% and 0.8% QoQ); and ii) such a comeback could be sufficient to have pushed the entire Eurozone out of the recession.
Tuesday, July 16, 2013
July ZEW sends mixed message
No further guidance. Today’s ZEW index has something for
everyone. The ZEW index which measures investors’ confidence dropped
unexpectedly to 36.3 in July, from 38.5 in June. At the same time,
however, investors have become more positive on the current economic
situation. The current assessment component increased to 10.6, from 8.6
in June. The first increase after three consecutive drops.
Today’s ZEW index fits into the current picture that the German economy looks like a grab bag, which has something for everyone. It has something for everyone. For the optimists, there is the strong labour market, solid private consumption, strong construction growth and confidence indicators at high levels. At the same time, however, there are dropping new orders, disappointing exports and the continuing euro crisis for the pessimists.
Admittedly, new dark clouds have started to black out growth prospects of the German economy. These clouds are not coming from the South but from the East. The stuttering and now slowing Chinese economy is a clear cause of concern. could become a new risk factor for the German economic outlook. China has become the fifth most important market for German exporters, accounting for roughly 6% of total exports. Obviously, a Chinese hard landing would not leave the German economy unharmed. In the short run, however, the stronger-than-expected recovery in the US and the UK should at least partly cushion a negative Chinese impact. Particularly the US could come to the German rescue. Over the last three years, the US has returned as Germany’s second most important trading partner.
Today’s ZEW index had something for both pessimists and optimist. The truth is probably somewhere in the middle: the German economy remains solid but we will have to get used to annual growth rates of around 1% and not 3%. With such growth rates, it won’t be the economy which decides the September elections but other issues. The latest spying affair and increasing domestic political pressure on the government could be a bigger game changer in the coming weeks. It is almost an irony of fate that exactly in this situation Germany seems to need the US economy more than ever.
Today’s ZEW index fits into the current picture that the German economy looks like a grab bag, which has something for everyone. It has something for everyone. For the optimists, there is the strong labour market, solid private consumption, strong construction growth and confidence indicators at high levels. At the same time, however, there are dropping new orders, disappointing exports and the continuing euro crisis for the pessimists.
Admittedly, new dark clouds have started to black out growth prospects of the German economy. These clouds are not coming from the South but from the East. The stuttering and now slowing Chinese economy is a clear cause of concern. could become a new risk factor for the German economic outlook. China has become the fifth most important market for German exporters, accounting for roughly 6% of total exports. Obviously, a Chinese hard landing would not leave the German economy unharmed. In the short run, however, the stronger-than-expected recovery in the US and the UK should at least partly cushion a negative Chinese impact. Particularly the US could come to the German rescue. Over the last three years, the US has returned as Germany’s second most important trading partner.
Today’s ZEW index had something for both pessimists and optimist. The truth is probably somewhere in the middle: the German economy remains solid but we will have to get used to annual growth rates of around 1% and not 3%. With such growth rates, it won’t be the economy which decides the September elections but other issues. The latest spying affair and increasing domestic political pressure on the government could be a bigger game changer in the coming weeks. It is almost an irony of fate that exactly in this situation Germany seems to need the US economy more than ever.
Thursday, July 11, 2013
Europa - even best onbelangrijk
Het is inmiddels een bekend stramien: grote Europese beslissingen worden uitgesteld. De toekomst van de eurozone, een financieel reddingsfonds voor eurozonebanken, een schuldenkwijtschelding voor Griekenland of een tweede reddingspakket voor Portugal? Alle vragen liggen op ijs, omdat de Duitsers dit spervuur nu niet kunnen hebben. Bondskanselier Angela Merkel wil de bloeddruk niet meer laten stijgen voor de verkiezingen op 22 september. Maar wat gebeurt er nadien? Krijgen we dan de Europese oerknal?
Tot nog toe is de Duitse verkiezingscampagne allesbehalve een oerknal. Ze is gewoon doodsaai. Merkel surft comfortabel op haar enorme populariteit en beoefent alleen nog het vermijden van uitglijders. Tegelijk slaagt haar sociaaldemocratische uitdager Peer Steinbrück er maar niet in te scoren. Ondanks de opkomst van een nieuwe anti-Europartij spelen Europa en de eurocrisis geen rol in de campagnes. Het thema Europa wordt beperkt tot kretologie of staatsmannelijk bobogedrag. Onlangs nog schamperde Steinbrück over het afschaffen van gloeilampen en de pietluttige regeldrift van de EU, en bood de bijeenkomst van regeringsleiders in Berlijn om de jeugdwerkloosheid aan te pakken Merkel een mooie gelegenheid om haar sociale kant als crisismanager te laten zien.
Eigenlijk jammer. Als de Duitsers het zouden willen, kunnen ze nu hun stempel drukken op de toekomst van de eurozone. Een blik op de verkiezingsprogramma's laat interessante verschillen zien. De huidige regeringspartijen staan nog steeds voor Merkels bekende strategie van voorwaardelijke integratie. De uitspraak van Kennedy parafraserend staat Merkel voor 'vraag niet wat de eurozone (of de Duitsers) voor jou kan doen, maar vraag wat jij voor de eurozone kunt doen'. Euro-obligaties en lastenverdeling worden uitgesloten. Helemaal anders ligt het bij de grootste twee oppositiepartijen. De sociaaldemocraten en de groenen zijn voorstander van een schuldenaflossingsfonds en van gemeenschappelijke financieringen. Ze durven zelfs het vermaledijde woord eurobonds in de mond te nemen.
Voor de meeste Duitsers blijft de eurocrisis een virtuele crisis. Ze zien ze op de televisie en ze lezen erover in de kranten, maar ze raakt hen niet werkelijk. Om die reden blijft de eurocrisis goed verstopt in de honderden pagina's verkiezingsprogramma's en speelt ze geen hoofdrol in de campagnes. Een gemiste kans op een nieuwe bladzijde in de Duitse geschiedschrijving. De Duitse verkiezingen raken de eurozone in het hart, maar Europa raakt de Duitser alleen in het hoofd en in de portemonnee. Het belang van deze verkiezingen voor Europa kan Duitsland niet echt boeien.
Deze column verscheen vandaag in het Belgische dagblad "De Tijd".
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