Focus topic Germany

Focus topic: GermanyGermany has recovered well from the global financial and economic crisis. Achieving sustainable growth, however, will require further improvements to the macroeconomic framework. This is a job for policymakers, businesspeople and the public alike. DB Research’s contribution will be to analyse the broad spectrum of issues, discussing possible solutions as well as the economic and political outlook. These range from assessments of economic-policy decisions and analyses of cyclical activity and sector trends right through to the effects of international developments on Germany as a business location.

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26.05.2017
Fewer crisis spots on the euro-area housing market
Abstract: The massive overvaluations on the euro-area market for residential real estate (as measured by the price-income ratios for 2007 and 2008) are a thing of the past. Currently, house prices are excessive only in several smaller countries. However, this situation is likely to change towards the end of the decade if the dynamic uptrend in German house prices continues as expected.
Topics: Construction industry; Economic growth; Economic trends; Germany; Prices, inflation; Residential real estate
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24.05.2017
Above-average pay in export sectors
Abstract: The traditional German export sectors pay their employees above-average wages and salaries. The top right-hand quadrant of the chart shows those sectors that generated a foreign trade surplus in 2016 and also paid their employees gross wages and salaries above the average for the manufacturing sector as a whole. In the automotive industry alone, the foreign trade surplus in 2016 was EUR 122 billion (39% of the total surplus). Wages and salaries in this sector were 27% higher than the industry mean. Mechanical engineering took second place in terms of foreign trade surplus (2016: EUR 94 billion). Here, however, average wages and salaries are only 7% above average. The chemical and pharmaceutical sectors as well as the other transport equipment sector are also characterised by high foreign trade surpluses and above-average pay. Interestingly, growth in gross wages and salaries between 2005 and 2016 was also above the industry average in all of the sectors specified. Gross wages and salaries per employee in the automotive industry and in other transport equipment increased by 38% and 39% respectively during this period, for example. The manufacturing industry as a whole experienced "only" a 28% increase.
Topics: Auto industry; Chemicals industry; Economic structure; Electrical engineering; Germany; Globalisation; Intern. relations; Labour market; Macroeconomics; Mechanical engineering; Other sectors; Real econ. trends; Sectors / commodities; Social values / Consumer behaviour; Trade
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05.05.2017
Focus Germany: Positive signs
Abstract: Growth in global trade almost stagnated at just 1.3% in 2016, and in some months was even negative. During winter, global trade picked up again, rising by around 3% compared to the same period a year earlier. Given the positive sentiment prevailing across the globe, this rebound could well continue. However, this trend is not yet being fully reflected in other hard economic indicators, usually highly correlated with global trade, and sentiment may therefore overstate the actual trend a little. Still, our simple model of world trade, which suggests moderate growth of just over 2% in 2017 and around 3% in 2018 might represent the lower limit of the forecast range. However, compared to previous cycles the upturn could remain weak, not least because of the global trade restrictions that have been progressively ratcheted up since 2008. (Further articles: Germany’s employment miracle, German election campaign not in full swing, yet)
Topics: Business cycle; Economic growth; Economic policy; Exchange rates; Germany; Labour market; Macroeconomics; Politics and elections; Prices, inflation; Real econ. trends; Sectors / commodities; Trade
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28.04.2017
Diesel: prematurely written off?
Abstract: The diesel scandal and political uncertainty surrounding future regulation are the main reasons why the proportion of vehicle registrations accounted for by diesel cars has slumped recently in Germany and most other EU countries. If the automotive industry wants to continue to rely on diesel technology, it needs to regain credibility and get to grips with the issue of emissions – including in real-world driving conditions. If it doesn't manage to do this, lawmakers are likely to progressively tighten the regulatory framework for diesel cars. However, should the industry succeed in bringing to market clean diesel cars at affordable prices, these cars would remain the most economical option for a large proportion of motorists – at least until alternative drive technologies become competitive from the customer perspective. This would make current proclamations of the death of diesel somewhat premature.
Topics: Auto industry; Economic policy; Energy policy; Environmental policy; Germany; Natural resources; Sectors / commodities; Sustainability; Transport policy
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06.04.2017
Focus Germany: Investment: Public, residential – gradually picking up
Abstract: In international debate public investment is often regarded as a useful lever for promoting higher domestic demand. Despite international criticism and political declarations of intent, public investment in Germany has only increased moderately over the past two years and has remained average, at best, on an international scale. In the coming years, however, public investment is expected to grow significantly. The current investment plans for the federal budget are 40% higher than those adopted in 2013. Public contracts for the construction industry in 2016 were between 15 and 27% above the average of the previous 10 years. The excellent state of the public finances at the various government levels also supports the prospect of increasing investment growth. However, severe capacity shortages in the construction industry are likely to mean that the high demand for investment will not quickly lead to an increase in construction activity. (Further articles: German housing market, Corporate bond boom in Germany, Result of the Saarland election)
Topics: Brexit; Business cycle; Economic growth; Economic policy; European issues; Exchange rates; Germany; Globalisation; Labour market; Macroeconomics; Monetary policy; Politics and elections; Prices, inflation; Real estate; Sectors / commodities; Trade
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13.03.2017
German election campaign: Close contest dominated by myopic debates
Abstract: The campaign for the German federal election on September 24 has speeded up. Since Mr. Schulz’ nomination the SPD seems to experience a new heyday. The party was able to nearly completely reduce the then huge backlog in the popularity ratings, i.e. from about 15pps to about 2pps at present.
Topics: Germany
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09.03.2017
Focus Germany: Growth and inflation leave ECB still unfazed
Abstract: At face value the pick-up of GDP growth at the end of 2016 (Q4: +0.4% qoq vs. +0.1% prev.) seems to fit with improving sentiment. However, given its composition we would argue that underlying growth was weaker than the headline suggests. We stick to our below consensus GDP forecast for 2017 (1.1%) and only make cosmetic changes in the details. We are raising our inflation forecast slightly overall for 2017, from 1.6% to 1.7%, compared with only 0.5% in 2016. We still expect core inflation to be only slightly above 1% in 2017. If the signs of global price increases are confirmed, then we could in fact see a more pronounced increase in core inflation, particularly if rising prices translate into second-round effects when wage negotiations are conducted in 2018. (Further articles: German industry, German election campaign)
Topics: Brexit; Business cycle; Economic growth; Economic policy; European issues; Exchange rates; Germany; Globalisation; Labour market; Macroeconomics; Monetary policy; Politics and elections; Prices, inflation; Sectors / commodities; Trade
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22.02.2017
ECB unimpressed by the rise in inflation – for now
Abstract: The headline inflation rates, which have increased substantially in recent months, have rekindled the debate surrounding the ECB's bond-buying programme. German producer prices have also risen sharply in recent times. In December 2016, the prices of metal (up by 5% on December 2015) and energy (up by 10%) increased particularly sharply. Nevertheless, the remaining inputs (weighting: 83.6%) continued to show no inflationary pressure at all.
Topics: European issues; Germany; Macroeconomics
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14.02.2017
False start for electric cars – dilemma facing the automotive industry and the state
Abstract:  In 2016, electric cars and hybrids represented only 1.8% of all new passenger car registrations in Germany. It therefore remains a niche market – despite the introduction of subsidies last year. The average car buyer steers clear of electric vehicles because of high purchase costs, uncertainty about resale value and battery life, limited range, a lack of charging stations and lengthy charging times. This reluctance to buy presents the automotive industry and the state with a dilemma: strict CO2 limits for new vehicles mean that the industry has to invest heavily in electric-car technology, but it cannot expect an equivalent payback in terms of revenue in the foreseeable future. For the state, it can come down to a straight choice between granting expensive subsidies or failing to reach climate change targets.
Topics: Auto industry; Economic policy; Energy policy; Environmental policy; Germany; Innovation; Sectors / commodities; Sustainability; Technology and innovation; Transport; Transport policy
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30.01.2017
Focus Germany: New SPD frontrunner unlikely to defeat Merkel
Abstract: 2016 GDP growth picked up further relative to the previous two years (1.9% vs. 1.7%). Growth was strongly tilted towards consumption thanks to several tailwinds (refugee crisis, low inflation, labour market strength), while slowing exports weighed on private equipment investment: With several tailwinds fading and a strong workday effect weighing, GDP growth looks set to slow to 1.1% in 2017. Recent sentiment indicators herald some upside risks for the current quarter. However, the 2.3 point drop in the expectations component of the January ifo index seems to corroborate our more cautious stance. In an unexpected turn, SPD party leader Gabriel announced that he would not run against Angela Merkel. Instead Martin Schulz, the former president of the European Parliament, will be the party’s frontrunner. Mr. Schulz’s unexpected nomination is likely to push the SPD’s campaign for the federal election on September 24 but unlikely to derail Merkel.
Topics: Business cycle; European issues; European policy issues; Germany; Globalisation; Intern. relations; Macroeconomics; Politics and elections; Prices, inflation
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