A deterioration in investor confidence in the prospects of the German economic system was recorded.
It is worth noting that the mentioned deterioration was fixed for the first time in a year. In this case, the source of the vision of the prospects of the German economic system, which does not provide for an optimistic perception of the most likely scenarios of the future, is the industrial sector. The problem is that the mentioned sector cannot match the pace of implementation of the gradual recovery process in other segments of the economy of the specified country.
The barometer of expectations compiled by the ZEW Institute was fixed at 41.8 in July. The relevant information was published on Tuesday, July 16. It is worth noting that in June, the mentioned indicator was fixed at 47.5. At the same time, experts interviewed by the media predicted that the barometer of expectations in July would be 41. The forecast of a deterioration in investor perception of the prospects for the German economic system turned out to be more pessimistic compared to the final results. At the same time, the positive discrepancy between expectations and reality, in this case, does not negate the fact that the assessment of the future in the context of the prospects of the economy of the mentioned country is on a downward trajectory.
It is worth noting that a deterioration in investor sentiment can have significant long-term consequences, some of which may be very substantial in terms of the scale and depth of the impact. Against the background of a corresponding perception of the prospects, Berlin may face the problem of reducing the volume of financial injections into the economy. It is worth noting that the appropriate negative scenario so far belongs to the category of hypothetical probabilities. At the same time, the materialization of the mentioned scenario is not something like a fantastic vision, suggesting the existence of something that cannot be in reality in the context of objective reasons.
ZEW President Achim Wambach says that the outlook of the German economic system is deteriorating. According to him, the formation of an appropriate vision of the future was facilitated by the fact that in May the volume of Berlin’s export activity decreased. It is worth noting that the mentioned decrease in the indicator turned out to be more extensive than preliminary expectations. Also in the context of considerations on the causes of the deterioration of the economic outlook, Achim Wambach mentioned the political uncertainty in France and the lack of clarity about which monetary policy strategy the European Central Bank will implement in the future.
The German economy, which is the largest in Europe, is gradually recovering its position, despite various difficulties and the lack of unambiguously optimistic prospects. The Bundesbank predicts that the mentioned recovery process will be slow. The financial regulator expects the pace of the corresponding dynamic in the current year to be 0.3%.
The slow growth of Europe’s largest economy is largely due to what can be called manufacturing weakness. Germany has recently recorded consistently disappointing statistics on industrial production and factory orders.
Economic difficulties have become a sophisticated ordeal for the industry of the mentioned country, overcoming which has not yet become a successful path. Half of the estimated 7% shortfall in German production capacity is structural. This means that achieving full recovery after almost two years of stagnation will be difficult to achieve.
The Hans-Böckler-Foundation’s Macroeconomic Policy Institute on Monday, July 15, said that its indicator of the risk of a recession scenario materializing in the space of the German economic system has increased. At the same time, representatives of the mentioned institute noted that an economic downturn is not inevitable.
Thomas Gitzel, chief economist at VP Bank, says that the German economy will depend on private consumption. The mentioned expert’s opinion is based on the fact that the situation in the industrial sector of the country is deteriorating. At the same time, Thomas Gitzel stated that private consumption will not be able to compensate for the slow development of the industry to such an extent as to ensure strong economic growth.
At the same time, the current assessment of the economic situation in Germany has improved. The corresponding indicator in July rose to minus 68.9 from minus 73.8 in the previous month. Michael Herzum, economist at Union Investment, says there are certain reasons for the mentioned tendency. In this context, the expert mentioned such factors as the growth of real incomes of the population and an increase in the availability of loans. However, Michael Herzum acknowledged the fact that the recovery of the German economic system is only modest. According to the expert, the probability that Donald Trump will become the winner of the presidential election in the United States is unsettling for Berlin. It is worth noting that in this case, the impact of the mentioned probability on the German economic system is implied.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, says that over the past week, euro markets have focused on the potential cutting of Federal Reserve interest rates. So far, the mentioned prospect of the actions of the central bank of the United States is perceived in the framework of a positive assessment and is not interpreted as a sign that a recession will soon become a reality for Washington.
As for the specific indicators of the condition of the German economic system, in this case, it should be mentioned that in May the volume of external supplies of this country decreased. The drop in the specified indicator turned out to be more significant than experts initially assumed. The corresponding result is associated with a drop in demand for German manufacturers’ products from consumers in the United States, China, and the European Union. In May, German exports fell by 3.6% compared with the figure recorded in April. It is worth noting that analysts interviewed by the media predicted that the volume of Berlin’s external supplies in the mentioned month would decrease by 1.9%.
Germany’s foreign trade balance in May amounted to 24.9 billion euros ($26.9 billion). In April, the corresponding figure was fixed at $22.2 billion. In May last year, Germany’s foreign trade balance amounted to $16.8 billion.
German imports in May fell by 6.6% compared to April. It is worth noting that experts interviewed by the media predicted that the mentioned indicator would show a decrease of 1%.
Claus Vistesen says that the plunge in imports is a warning for the forecast that consumption is now rebounding, though the correlation between imports and consumers’ spending is far from perfect. At the same time, the expert expects that import and export indicators will show growth in the coming months. Claus Vistesen stated in this context that the mentioned tendencies are positive.
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