Today’s stabilization in eurozone purchasing managers' indices (PMI) is reassuring after recent economic indicators for the region came in below expectations pointing to a marked deceleration in economic momentum.
In the past five months, President Trump signed into law the TCJA (Tax Cuts and Job Act, on December 22, 2017) and the 2018 Bi-Partisan Budget Act (on February 9, 2018), which was recently completed with the FY2018 Omnibus Appropriation Bill (on March 23, 2018). They correspond to three pivotal fiscal policy blocks, each having a series of positive effects on the US economy.
From an economic point of view, the eurozone could hardly be in better shape than it is today. The upswing seems likely to continue , the peak has just begun. This development is reflected in the results of this year's Euro Monitor, with which we measure the state of the euro economies on the basis of 20 indicators every year.
In summer 2017, the ECB made a surprising move by releasing calculations on the net interest income of households in various EMU countries. According to the ECB's data, the income effects of the low interest rates were low in general (totaling up to 2% of GDP at the most), to the extent of being negligible in Germany. What is more, there were no signs of any pattern emerging with regard to the effects - with more positive effects on the (indebted) "south" of the continent and more negative effects on the (thrifty) "north".
We estimate the positive effect of the tax cuts on real economic growth in the US at more than half a percentage point in 2018 and between a quarter and half a percentage point in 2019. Additional economic effects could result from the Bipartisan Budget Act of 2018, which leaves room for considerable additional government expenditure.
In December 2017, output in industry, including energy and construction, fell by 0.6% on a seasonally and working day basis compared with November, but overall output increased by 0.7% in the fourth quarter of 2017 compared with the previous quarter.
The recent collapse in the stock markets confirms expectations that the year 2018, which is likely to bring further interest rate hikes by the US central banks and the first steps towards normalization of monetary policy in the eurozone and Japan, will be accompanied by sharp fluctuations in prices.
Between a pro-European government in France and early discussions of a Große Koalition in Germany, there is political momentum on both sides of the Rhine for a stronger Europe. Building on the principle of subsidiarity, and focusing on cost-effective institutional breakthroughs, France and Germany could drive the European project further with ten initiatives in five reform areas.
Populist economic policies can boost growth and financial markets in the short term, but they also purport uncertainty and volatility. Populists’ disdain for checks and balances threatens to weaken pluralist democracies, while their predilection for facile solutions rarely results in sound policies.
Mainstream election victories in 2017 made many observers believe that populism has peaked. Looking at longer-term trends that fuel political discontent and disorientation, we do not concur. The days when mainstream center-right and center-left parties smoothly alternated in power appear to be over. That does not mean that all risks are on the downside.
The two biggest economies in Europe have been the subject of various wrong analyses and common-knowledge truisms. This report sets out to refute seven such misconceptions. These are: a higher French birth means potential growth is higher than in Germany; labor productivity is higher in France than in Germany because of France’s higher number of unemployed; Fiscal austerity is stronger in Germany than in France; France lost the competitiveness battle to Germany; German SMEs are performing better than French ones; France is Germany's main trading partner; and Because it grows faster, Germany should invest more than France.
In our latest report “Returns on private assets in selected EMU countries”, we investigate household savings behavior in nine European countries since 2003. In doing so, we are not only interested in the volume of savings but also in the contributions of investment income and value gains – the implicit yield on financial assets – before, during and after the crisis.
Russian GDP is set to grow by 1.9%, the oil price will move to $56 per barrel, Russian exports are set to increase by $26bn, and both insolvencies and the negative impact of international sanctions on investment will decline in 2018 forecasts Euler Hermes, the world’s leading trade credit insurer. With this background demand for trade credit insurance is set to grow.
On 24 September, this year of European elections will reach its next climax: the election of a new German government. These elections are taking place against the backdrop of a pronounced boom in the German economy.
The ECB has to make a move towards normalization. Soft tapering – though not our own core scenario – is an option. It consists of stopping or reducing reinvestments of principal payments before reducing Quantitative Easing (QE). Why choose different sequencing from the Fed?
Global growth is accelerating (at last), yet not all engines are in sync. A disappointing U.S., reassuring Europe and stabilizing Emerging markets create good – not great – momentum. We forecast GDP to grow +2.9% in 2017 and 2018, unchanged from our last scenario. It will be the seventh consecutive year below 3%.
Although production in industry, which includes manufacturing, construction and energy, slipped by 1.1% in June 2017 against the previous month in seasonally adjusted terms and after adjustments to reflect the number of working days, it did bounce back in the second quarter of 2017 compared to the first, expanding by 1.8%.
There has been a noticeable increase in destabilizing political events in recent years. This begs the question whether we are dealing with an unfortunate accumulation of political accidents, or whether there is something systemic going on.
In their latest study, Allianz SE analyzes the growth prospects of global life and p&c insurance markets. After the meager years of the financial and economic crisis, insurers can look ahead with more confidence: While insurance premiums grew worldwide by only 3.1 percent between 2008 and 2016, growth should accelerate to 5.9 percent over the next decade.
The outcome of the French parliamentary elections, that gave Emmanuel Macron’s party "La République en marche” a clear majority, is in tune with a study carried out by Institut für Demoskopie Allensbach on behalf of Allianz on the mood in Germany and France ahead of their respective elections.
Economic momentum at the start of the year remains strong, in line with our expectations. After slowing in 2016, trade momentum should be boosted by a lower EUR in 2017 (1.05 against the USD) and the global growth acceleration.
Although the steep 3% month-on-month slide in industrial production in December can be partially explained by the constellation of Christmas holidays, it does mean that production in the fourth quarter of 2016 actually fell by 0.1% compared with the third quarter.
Last year, the global economy proved fairly resilient in the face of unexpected shocks. Neither concerns about a slowdown in the Chinese economy nor major political surprises – including the result of the Brexit referendum in June and the outcome of the US presidential elections in November – managed to knock the global economy off its moderate growth path.
As expected, today’s ECB Council meeting was a non-event. The substantially improved economic data of late and the higher December inflation figure in the eurozone offered no grounds to put the recently extended bond purchasing program up for discussion again.
On the economic front a humming domestic economy was the hallmark of 2016. The external side provided only a limited boost. At 2.5%, German exports expanded more strongly than world trade, which more or less stagnated on average last year.
Elections in France, Germany and the Netherlands, the move of the US President-elect Donald Trump into the Oval Office, the start of Brexit negotiations – given the elevated uncertainty hanging over political and economic developments next year, there is really only one thing that is certain: 2017 will be an eventful and interesting year.
After the defeat in the constitutional referendum Italy’s Prime Minister has tendered his resignation. In the short term heightened political uncertainty is likely to weigh on financial markets and economic sentiment.
Today’s inflation numbers are moving slowly in the right direction. Although next week the ECB is likely to extend its monthly bond purchases of EUR 80bn for a few months more, we see plenty of reasons for it to simultaneously announce a reduction in the purchase volume for the time thereafter.