The manufacturing outlook remained broadly unchanged, with survey respondents reporting a deterioration in current business as compared with April but improved expectations over the next six months.
In wholesaling and retailing business climate has generally improved. Retailers are no longer so dissatisfied with their current business situation and anticipate a less unfavourable six-month business outlook. In construction the climate was found to have worsened again. Building contractors are less satisfied with their current business situation and havea less favourable business outlook than in April.
Chancellor Angela Merkel’s coalition has intorduced stimulus plans worth about 82 billion euros to try to offset the worst of the recession, and the government still expects the economy to contract by around 6 percent in 2009.
The European Central Bank this month reduced its benchmark rate to 1 percent, a record low, and ECB President Jean-Claude Trichet does not exclude the possibility of further cuts.
The top Germany economic institutes forecast the country will lose 1.4 million jobs this year and next, pushing the average number of unemployed to a five-year high of 4.7 million. German unemployment rose for a sixth straight month in April, taking the jobless rate to 8.3 percent.
On the other hand German manufacturing activity contracted at the slowest pace in seven months in May,according to the flash purchasing managers index, while investor confidence rose significantly this month, climbing to a three-year high.
Bundesbank President Axel Weber said recently “There are some grounds for being optimistic......However, it is certainly not advisable to be overly optimistic that the recovery process is safely on track.”
5 comments:
The euro is around 1.40 to the US dollar, in your opinion will this effect in a negative fashion German exports?
Also,
I look forward to seeing the next German business confidence survey especially if the Euro stays above or at 1.40 to the US dollar.
I think that the stronger Euro will not be at all welcome by the ECB and they in turn may be forced to do something about it...what that is I have no idea(q-easing etc..)..
Final comment,
The ECB´s so called dis-inflation
is heading even more rapidly for deflation if the EURO continues to strengthen or stays at current levels(oil must stay at current levels and not rise further). In my opinion the strong EURO is the last thing the export driven economy of Germany needs at this juncture in the recession. And since Germany is the heart of the EU to me this suggests that any real recovery for Europe is a long way off.
Hello,
Thanks for the comments. I think we broadly agree.
"The euro is around 1.40 to the US dollar, in your opinion will this effect in a negative fashion German exports?"
Well, I think the thing is, the German economy was previously "waterproof" to euro/USD when:
i) Eurozone economies like Spain and Italy were still growing and eating up exports
ii) The UK pound was moving in the same direction as the euro
iii) East Europe and Russia were booming
Now none of these conditions exist. Only France is more or less holding up (even if in recession). So Germany will look further afield for exports, even as the US and Japan struggle themselves to become more competitive.
So the annswer is yes. The weaker dollar will now hurt Germany. How much so we are about to see.
"I think that the stronger Euro will not be at all welcome by the ECB and they in turn may be forced to do something about it..."
Well, it is not at all clear what they can do. In my view - with US interest rates near zero, and possibly set to stay there for some time - the USD has replaced the Japanese yen as the favoured "carry" currency (see my recent "Don't Get Carried Away", on Global Economy Matters), and thus will be inherently weak as people borrow dollars to convert into Brazilian real, Indian rupee, Turkish lira, or whatever.
"The ECB´s so called dis-inflation
is heading even more rapidly for deflation"
Definitely.
"And since Germany is the heart of the EU to me this suggests that any real recovery for Europe is a long way off."
Ditto. Stabilising a contraction is not the same as recovery, and saying the "worst is over", simply means we won't again be contracting at a 15% annual rate. But for how long can we continue to contract at a 5% annual rate, or a 3% one?
Thanks Edward for the comments you made to my observations and questions. I honestly feel that the Euro zones ¨green shoots¨ are in serous jeopardy of becoming dried out wilting weeds..(if they haven´t already) all due in large part to the strong Euro..
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