Turning the tide? After a batch with worsening sentiment
indicators over the last months, today’s ZEW index provides first tender
evidence that the tide is turning again. The ZEW index which measures
investors’ confidence increased marginally in May to 36.4, from 36.3 in
April. Its absolute level is clearly above the historical average. At
the same time, investors have become somewhat more negative on the
current economic situation. The current assessment component dropped to
8.9, from 9.2 in April; the second consecutive drop.
In the past, the ZEW index did not have the best track record when it
comes to predicting German economic activity. In fact, since 2006, the
index had a tendency to “miss” the periods of strong growth. However,
since mid-2011, however, the components of the ZEW and the Ifo have
broadly stayed in tune. With this in mind, today’s data is encouraging
for the growth outlook of the German economy.
Doubts about the strength of the German economy have almost become a new
ritual at the beginning of each year. Indeed, over the last couple of
years, the economy has often had a rusty start. Sometimes due to the
euro crisis, sometimes due to the weather. In the end, however, the
economy always managed to leave (almost) all problems behind. Even if
the recovery is not yet as strong as in earlier years, it still looks as
if the German economy’s resilience will prevail again this year.
Tuesday, May 14, 2013
Wednesday, May 8, 2013
German IP points to rebound in 1Q
Signs of life. The German industry is bucking the trend of negative news across the Eurozone. German industrial production increased by 1.2% MoM, from an upwardly revised +0.6% MoM in March. On the year, industrial production is still down by 2.5%. As expected, the construction sector suffered enormously from the harsh winter weather, dropping by 3.1% MoM, after a 1.6% drop in February. Production in all other sectors, however, was up.
The German industry has stabilised further since the turn of the year, even if the rebound is still bumpy. Industrial production excluding the construction sector is now finally above its fourth quarter level. At the same time, however, the construction sector suffered from the harsh winter weather and it is not over, yet. According to the latest European Commission indicators, German construction firms still suffered from the weather in April. The weather-inclined rebound should be delayed once again.
Looking ahead, however, prospects for the industry are clearing up again. Even if producer confidence deteriorated recently due to new Eurozone unrest, production plans are improving. Moreover, new orders increased significantly in March (2.2% MoM; actually the first increase in two consecutive months since March 2012. On top of that, capacity utilisation rebounded in the first months of 2013 and German companies have started to cautiously step up their investment plans.
A week ahead of the release of the first estimate of 1Q GDP growth, the bean counting has begun again. The available hard data provides evidence that the German economy should have left recessionary territory again, even if it has not been a vintage performance so far. Private consumption has increased on the back of low unemployment and wage increases and net-exports have also been growth-supportive so far. Despite renewed Eurozone uncertainty and slightly erratic confidence indicators, the German economy should have left the contraction behind.
All in all, the German economy and the weather seem to be closely linked. Not only has the harsh winter weather taken a huge toll on the entire economy, the economy also seems to copy recent weather variations. In fact, maybe the recovery is just like this year’s springtime. First it is delayed, then it comes with ups and down and when it is finally here, hardly anyone notices.
The German industry has stabilised further since the turn of the year, even if the rebound is still bumpy. Industrial production excluding the construction sector is now finally above its fourth quarter level. At the same time, however, the construction sector suffered from the harsh winter weather and it is not over, yet. According to the latest European Commission indicators, German construction firms still suffered from the weather in April. The weather-inclined rebound should be delayed once again.
Looking ahead, however, prospects for the industry are clearing up again. Even if producer confidence deteriorated recently due to new Eurozone unrest, production plans are improving. Moreover, new orders increased significantly in March (2.2% MoM; actually the first increase in two consecutive months since March 2012. On top of that, capacity utilisation rebounded in the first months of 2013 and German companies have started to cautiously step up their investment plans.
A week ahead of the release of the first estimate of 1Q GDP growth, the bean counting has begun again. The available hard data provides evidence that the German economy should have left recessionary territory again, even if it has not been a vintage performance so far. Private consumption has increased on the back of low unemployment and wage increases and net-exports have also been growth-supportive so far. Despite renewed Eurozone uncertainty and slightly erratic confidence indicators, the German economy should have left the contraction behind.
All in all, the German economy and the weather seem to be closely linked. Not only has the harsh winter weather taken a huge toll on the entire economy, the economy also seems to copy recent weather variations. In fact, maybe the recovery is just like this year’s springtime. First it is delayed, then it comes with ups and down and when it is finally here, hardly anyone notices.
Tuesday, May 7, 2013
Beiers gevaar voor Angie
Bayern München is de nieuwe grootmacht in het Europese voetbal. Dominantie en succes horen bij het Beierse zelfbesef. Beieren is de motor van de Duitse economie en het bewijs dat Lederhosen en moderne technologieën bij elkaar passen. Beieren is ook een grootmacht in het Duitse politieke landschap. Een bolwerk van Angela Merkels christendemocraten. Maar na jaren van lusten dreigt Beieren nu een gevaar te worden voor Angela Merkel. Beieren belast letterlijk haar herverkiezing.
Beieren en belastingen zijn in Duitsland hét thema. Eerst bleek Uli Hoeneß, de bekende en populaire baas van Bayern München, met zwart geld in Zwitserland op de financiële markten te hebben gegokt. En nu is er ook een hele affaire over Beierse politici die ruimhartig familieleden in hun hofhouding hebben opgenomen. Terwijl dat laatste tot voor kort juridisch gezien niet strafbaar was, heeft het tot een grote morele verontwaardiging geleid. Er zijn inmiddels zelfs politici voor opgestapt.
Wat voor outsiders misschien op een regionaal vuurtje lijkt, is een buitenkans voor de roddelpers en kan tot een uitslaande bosbrand leiden voor Angela Merkel. Beieren was altijd al een beetje anders. Het is niet alleen een Duitse deelstaat, maar ook een vrijstaat in Duitsland. Een vrijstaat die sinds de Tweede Wereldoorlog bijna als een monarchie wordt gerund. Een monarchie onder leiding van de CSU - de Beierse zusterpartij van Angela Merkels CDU - die elf van de zestien regionale verkiezingen sinds 1946 met een volstrekte meerderheid heeft gewonnen. De grootte van Beieren maakt dat de CSU bij nationale verkiezingen snel 7 tot 10 procent van alle stemmen wint. Bijna elke conservatieve bondskanselier heeft een sterke Beierse CSU nodig om verkiezingen te winnen.
Belastingontduiking en nepotisme doen het nooit goed in Duitsland. Zeker niet vlak voor verkiezingen. Sowieso hebben steeds meer Duitsers het idee dat kleine dieven ijzeren ketenen hebben en grote dieven gouden. De oppositiepartijen waren al eerder begonnen aan een campagne voor sociale rechtvaardigheid en zullen niet nalaten dat vuur aan te wakkeren. Door de Beierse affaires bleef zelfs de owngoal van de oppositie - plannen voor een forse belastingverhoging na de verkiezingen met rijken- en vermogensbelastingen à la française - tot nog toe zonder voelbare schade.
De Duitse verkiezingen worden nog zeer spannend. Anders dan veel buitenlandse commentatoren denken, is het verre van een gelopen race. Een derde termijn als kanselier voor Merkel zal niet afketsen door haar eigen fouten, maar kan elk moment stuklopen door kleine, onvoorspelbare affaires buiten haar bereik. Er is echter kans dat Merkel ook die affaires overleeft. In de Duitse geschiedenis werd er maar één conservatieve politicus bondskanselier zonder een absolute meerderheid van de CSU in Beieren: Angela Merkel, in 2009.
Deze column verscheen vandaag in het Belgische dagblad "De Tijd"
Beieren en belastingen zijn in Duitsland hét thema. Eerst bleek Uli Hoeneß, de bekende en populaire baas van Bayern München, met zwart geld in Zwitserland op de financiële markten te hebben gegokt. En nu is er ook een hele affaire over Beierse politici die ruimhartig familieleden in hun hofhouding hebben opgenomen. Terwijl dat laatste tot voor kort juridisch gezien niet strafbaar was, heeft het tot een grote morele verontwaardiging geleid. Er zijn inmiddels zelfs politici voor opgestapt.
Wat voor outsiders misschien op een regionaal vuurtje lijkt, is een buitenkans voor de roddelpers en kan tot een uitslaande bosbrand leiden voor Angela Merkel. Beieren was altijd al een beetje anders. Het is niet alleen een Duitse deelstaat, maar ook een vrijstaat in Duitsland. Een vrijstaat die sinds de Tweede Wereldoorlog bijna als een monarchie wordt gerund. Een monarchie onder leiding van de CSU - de Beierse zusterpartij van Angela Merkels CDU - die elf van de zestien regionale verkiezingen sinds 1946 met een volstrekte meerderheid heeft gewonnen. De grootte van Beieren maakt dat de CSU bij nationale verkiezingen snel 7 tot 10 procent van alle stemmen wint. Bijna elke conservatieve bondskanselier heeft een sterke Beierse CSU nodig om verkiezingen te winnen.
Belastingontduiking en nepotisme doen het nooit goed in Duitsland. Zeker niet vlak voor verkiezingen. Sowieso hebben steeds meer Duitsers het idee dat kleine dieven ijzeren ketenen hebben en grote dieven gouden. De oppositiepartijen waren al eerder begonnen aan een campagne voor sociale rechtvaardigheid en zullen niet nalaten dat vuur aan te wakkeren. Door de Beierse affaires bleef zelfs de owngoal van de oppositie - plannen voor een forse belastingverhoging na de verkiezingen met rijken- en vermogensbelastingen à la française - tot nog toe zonder voelbare schade.
De Duitse verkiezingen worden nog zeer spannend. Anders dan veel buitenlandse commentatoren denken, is het verre van een gelopen race. Een derde termijn als kanselier voor Merkel zal niet afketsen door haar eigen fouten, maar kan elk moment stuklopen door kleine, onvoorspelbare affaires buiten haar bereik. Er is echter kans dat Merkel ook die affaires overleeft. In de Duitse geschiedenis werd er maar één conservatieve politicus bondskanselier zonder een absolute meerderheid van de CSU in Beieren: Angela Merkel, in 2009.
Deze column verscheen vandaag in het Belgische dagblad "De Tijd"
Monday, May 6, 2013
Letter from Brussels - Eurosklerose
Mit den ersten Sonnenstrahlen ist auch die Grippewelle in Brüssel abgeklungen. Die Freude über den späten Frühling und die neue Gesundheit währt allerdings nicht lange. Eine längst vergessene Krankheit ist wieder im Anflug: Eurosklerose.
Vor 30 Jahren machte sich eine wirtschaftliche Krankheit in Europa breit, dessen Symptome hohe Arbeitslosigkeit, Rezession und düstere Wachstumsprognosen waren. Eurosklerose war damals das Pseudonym für Hoffnungs- und Ratlosigkeit. Genau diese macht sich auch jetzt wieder bei den Euro-Rettern breit. Der große Befreiungsschlag in der Eurokrise will einfach nicht gelingen.
Bisher wurde versucht, die Krise mit einer Art partieller Akupunktur zu meistern. Kleine therapeutische Nadelstiche, meist gesetzt durch die EZB, haben das Gröbste abgewendet, sorgen aber noch nicht für schnelle Genesung. Deshalb versuchen die Euro-Retter im Augenblick die bereits gesetzten Nadeln zu lockern. Das sogenannte Spardiktat steht wieder unter Beschuss. Zu Unrecht, denn es gibt kein Spardiktat, sondern ein Krisenmanagement, das aus Schuldenabbau und Strukturreformen besteht. Natürlich ist es sinnvoll die Geschwindigkeit des Sparens den wirtschaftlichen Bedingungen anzupassen, aber eine Abkehr der Politik von nachhaltigen Staatsfinanzen zurück zu schuldenfinanziertem Wachstum wäre ein verheerendes Zeichen. Im Übrigen würde es die fundamentalen Probleme eines spanischen Immobilienmarktes, der griechischen Staatsfinanzen oder mangelnder italienischer und französischer Konkurrenzfähigkeit auch nicht lösen.
Heilung durch Akupunktur kann gelingen, erfordert aber viel Geduld. Geduld und Kraft, die durch das Streben nach einer gemeinsamen (besseren) Zukunft aufgebracht werden kann. Vielleicht hilft dabei ein Blick in die Vergangenheit. Die Eurosklerose wurde letztendlich durch ein gemeinsames Projekt besiegt: den Euro.
Diese Kolumne wurde eher in der Wochenzeitung "Euro am Sonntag" veroeffentlicht.
Friday, May 3, 2013
Adjustment continues...but not everywhere
At the end of an exciting week, just two interesting charts, stemming from the European Commission's almost undiscovered data treasure on cost and price competitiveness indicators.
The structural adjustment, Commissioner Olli Rehn mentioned in today's press conference, is indeed continuing. All four Eurozone peripheral countries (IR, GR, PT and SP) have experienced a significant catching up of their cost competitiveness positions vis-a-vis the rest of the Eurozone. However, there are two countries where the adjustment has not even started. Looks as if the Eurozone is heading towards its next big problem...
The structural adjustment, Commissioner Olli Rehn mentioned in today's press conference, is indeed continuing. All four Eurozone peripheral countries (IR, GR, PT and SP) have experienced a significant catching up of their cost competitiveness positions vis-a-vis the rest of the Eurozone. However, there are two countries where the adjustment has not even started. Looks as if the Eurozone is heading towards its next big problem...
Thursday, May 2, 2013
Chill-pill from Bratislava
The ECB cut the main refinancing rate from 0.75% to 0.5% and the marginal lending rate – the rate at which banks can borrow overnight – from 1.5% to 1%. At the same time, the ECB left the deposit rate unchanged at 0%. The long-awaited relief for SMEs was not presented, yet, only hinted at.
Listening to the ECB’s macro-economic assessment, hardly anything seems to have changed compared with the last rate-setting meeting in April. As regards the economic analysis, the only change was the ECB’s acknowledgement that the economic weakness had extended “into spring”, compared with “into the early part of the year” in April. Interestingly, for the first time, labour market weakness made it into the ECB’s introductory statement. Cynics could argue that the ECB is moving further towards the Federal Reserve’s dual mandate.
As regards the inflation outlook, the ECB took note of the latest drop in headline inflation to 1.2% YoY but still sees risks to the outlook for price developments as broadly balanced.
Today’s rate cut mainly provides support for peripheral banks and could boost confidence marginally. However, to some extent, today’s rate cut does not fully fit into the ECB’s normal pattern of forward-looking policy. Judging from Draghi’s comments and taking them at face value, the rate cut was rather motivated by lagging than by leading indicators.
Next to the rate decision, a lot of market attention was on any ECB action to restore SME funding. Here, the ECB announced that the fixed rate tender procedures will continue to be conducted with full allotment at least until 8 July 2014. Although the ECB always love to state that they never pre-commit, this announcement is the boldest signal of long-term commitment to accommodative policies for a long while. In the past, unlimited liquidity had been promised for around six months. Now it is for another 14 months. Finally, on the real heart of the matter, the ECB announced that it has started consultations with other European institutions “on initiatives to promote a functioning market for asset-backed securities collateralized by loans to non-financial corporations”.
Although it remains very vague what the consultations with other European institutions could actually deliver, it is obvious that this is the step to tackle the SME lending problem. Draghi explicitly referred to the European Investment Bank (EIB) as the most important counterpart. This makes the option that the EIB guarantees SME loans, which in turn can then be used as collateral at the ECB, still the most likely outcome of these consultations. However, let’s not forget that the EIB has also access to the ECB’s liquidity facilities and might eventually buy SME-loans directly. The latter would obviously come close to a Eurozone-style quantitative easing. Draghi’s comment that “we are far from reaching any conclusions”, however, show that SMEs in peripheral countries still have to be patient before possibly receiving some relief.
In April, ECB president Draghi talked about his 360 degrees view on all possibilities. Today’s meeting confirms that the bright minds in the Eurotower are still working hard to come up with a new magic bullet. In the meantime, the only thing Draghi found in his toolkit was an old tool and a chill-pill to keep markets happy in the waiting room.
Listening to the ECB’s macro-economic assessment, hardly anything seems to have changed compared with the last rate-setting meeting in April. As regards the economic analysis, the only change was the ECB’s acknowledgement that the economic weakness had extended “into spring”, compared with “into the early part of the year” in April. Interestingly, for the first time, labour market weakness made it into the ECB’s introductory statement. Cynics could argue that the ECB is moving further towards the Federal Reserve’s dual mandate.
As regards the inflation outlook, the ECB took note of the latest drop in headline inflation to 1.2% YoY but still sees risks to the outlook for price developments as broadly balanced.
Today’s rate cut mainly provides support for peripheral banks and could boost confidence marginally. However, to some extent, today’s rate cut does not fully fit into the ECB’s normal pattern of forward-looking policy. Judging from Draghi’s comments and taking them at face value, the rate cut was rather motivated by lagging than by leading indicators.
Next to the rate decision, a lot of market attention was on any ECB action to restore SME funding. Here, the ECB announced that the fixed rate tender procedures will continue to be conducted with full allotment at least until 8 July 2014. Although the ECB always love to state that they never pre-commit, this announcement is the boldest signal of long-term commitment to accommodative policies for a long while. In the past, unlimited liquidity had been promised for around six months. Now it is for another 14 months. Finally, on the real heart of the matter, the ECB announced that it has started consultations with other European institutions “on initiatives to promote a functioning market for asset-backed securities collateralized by loans to non-financial corporations”.
Although it remains very vague what the consultations with other European institutions could actually deliver, it is obvious that this is the step to tackle the SME lending problem. Draghi explicitly referred to the European Investment Bank (EIB) as the most important counterpart. This makes the option that the EIB guarantees SME loans, which in turn can then be used as collateral at the ECB, still the most likely outcome of these consultations. However, let’s not forget that the EIB has also access to the ECB’s liquidity facilities and might eventually buy SME-loans directly. The latter would obviously come close to a Eurozone-style quantitative easing. Draghi’s comment that “we are far from reaching any conclusions”, however, show that SMEs in peripheral countries still have to be patient before possibly receiving some relief.
In April, ECB president Draghi talked about his 360 degrees view on all possibilities. Today’s meeting confirms that the bright minds in the Eurotower are still working hard to come up with a new magic bullet. In the meantime, the only thing Draghi found in his toolkit was an old tool and a chill-pill to keep markets happy in the waiting room.
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