Latest news with #Ifo
Qatar Tribune
23-05-2025
- Business
- Qatar Tribune
Eurozone business activity contracts in May
Agencies Business activity in the eurozone contracted for the first time in five months in May, weighed down by surprising weakness in the services sector, the bloc's engine in the past, a closely watched survey showed Thursday. Europe's growth has trailed global peers, particularly the U.S., since the pandemic and predictions for a rebound have been proven wrong time and again as firms hold back investment, households sit on savings and governments fail to enact the sort of structural policies that would reduce inefficiency. The closely watched composite HCOB Purchasing Managers' Index (PMI) for the bloc dropped to 49.5 in May from April's 50.4, dropping below the 50 mark separating growth from contraction and falling short of the 50.7 expectation in a Reuters poll of economists. The figure is especially worrisome for services, the driver of growth in recent years, as it was the main culprit in the decline, although economists cautioned against reaching firm conclusions since the noise generated by rapidly shifting U.S. trade policy was a key factor. This week, the European Commission, the EU's executive body, cut its economic growth forecast for 2025 to 0.9%, from a previous prediction of 1.3%. The reduced output in services – 48.9 in May compared with 50.1 in April – stood in contrast with growth in manufacturing output of 51.5 in May, unchanged from April. 'The trade war is weighing on the eurozone economy, but likely mostly through the uncertainty channel rather than direct trade effects so far,' ING economist Bert Colijn said. 'Sluggishness remains the name of the game for eurozone economic activity, and risks seem to be to the downside for the short term as the trade war could intensify,' Colijn added. While even HCOB acknowledged that figures were weak, it said there was some good news in the outlook. 'There are reasons for confidence in the longer term,' HCOB chief economist Cyrus de la Rubia said. 'The recovery in manufacturing is broad-based, with encouraging signs coming out of both Germany and France.' 'Germany, in particular, might be gearing up to reclaim its role as the euro zone's economic engine, thanks to a potentially very expansionary fiscal policy,' he said. Germany plans a historic spending package to boost defense and invest in infrastructure. Signalling heightened expectations for the new German government, the Ifo Institute's monthly sentiment indicator rose a touch more than predicted this month and expectations rose sharply in both wholesale and retail trade. 'The German economy is slowly regaining its footing,' Ifo President Clemens Fuest said. Economists added that seven interest rate cuts by the European Central Bank (ECB) in the past year were also propping up sentiment and reducing cost, especially since the bank is still not done easing and a few more steps are likely. 'The fifth consecutive increase in the Ifo business climate index shows that German companies defied Trump's tariff shock also in May,' Commerzbank economist Joerg Kraemer said. 'Apparently, the positive effects of the ECB's rate cuts outweigh the higher tariffs.' Still, economists said the lukewarm readings on current business conditions combined with only a modestly optimistic outlook add up to tepid growth, fraught with downside risks. The ECB and the European Commission both see the eurozone growing by less than 1% this year, much like last year, and see risks tilted to more negative outcomes, especially if the trade war intensifies.
Yahoo
09-05-2025
- Business
- Yahoo
Germany urged to cut public holidays to boost war effort
Germans should sacrifice an annual public holiday to fund the nation's rearmament, a top economic institute has proposed. Europe's largest economy faces a crippling shortage of workers, which is undermining its effort to rebuild its military and embark on a construction programme to revitalise national infrastructure. Fixing the problem, according to the Ifo Institute, a think tank, must involve working harder, including taking less time off. The number of public holidays varies by state, with Bavaria benefitting from 13 days. Clemens Fuest, the Ifo president, said Germany cannot rely on extra borrowing and spending by Chancellor Friedrich Merz's new government to transform the economy. He said: 'The fact that loans are being provided for infrastructure and armaments secures the financing. But where will the labour come from to implement all this? 'Unless more labour is available than before, these spending programmes will increase wages in the defence and construction industry, causing workers to migrate from other sectors. 'Other industrial sectors would have to shrink, and staff would become more scarce in important service sectors such as health and care. Prices would rise everywhere, and many citizens would have to tighten their belts.' He estimates that the extra day's work would add €8bn (£6.8bn) to the economy's annual output. Germany would not be the first country to contemplate such a move. Mr Fuest notes that Denmark abolished one of its bank holidays in 2023 to fund a bigger defence budget. Emmanuel Macron, the French president, has proposed a new school calendar without the traditional long eight-week summer break. In Germany, almost one third of industries say they are suffering from a shortage of skilled workers, underlining the need for more labour. Rearmament also threatens to make the shortages worse as more Germans will work for the armed forces instead of in civilian industries. The economy has barely grown since the pandemic, with output in the first quarter of this year almost identical to the level on the eve of Covid. Mr Merz's first move – acting under the old parliament, before new members took their seats – was to change the country's constitutional 'debt brake', allowing the new administration to borrow and spend more. Extra military spending is expected to boost the manufacturing industry, while economists hope that more infrastructure investment will improve long-term growth prospects. The measures have already had repercussions across Europe. The low-debt German government's borrowing costs are typically used as the benchmark for determining interest rates for other nations, and on to businesses and households, across the eurozone. As plans for extra borrowing from Berlin have pushed up its borrowing costs in debt markets, so has the impact been felt across the currency area. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Int'l Business Times
30-04-2025
- Business
- Int'l Business Times
German Growth Better Than Expected But Tariff Turmoil Looms
Germany's struggling economy grew faster than expected at the start of the year, data showed Wednesday, in a boost for the incoming government of conservative Friedrich Merz even as US tariffs threaten to derail the nascent recovery. Gross domestic product (GDP) in Europe's biggest economy expanded 0.2 percent from January to March compared to the previous quarter, according to provisional figures from federal statistics agency Destatis. The expansion, driven by improving consumption and investment, was better than analyst forecasts and meant Germany dodged a recession -- defined as two straight quarters of negative growth -- after a contraction at the end of last year. It was rare good news for the eurozone's traditional growth engine which has been battling a manufacturing slowdown, rising costs and weak demand in key overseas markets, prompting the economy to shrink in both 2024 and 2023. The improving picture will come as a relief for incoming chancellor Merz as he prepares to take office next week, with the dire state of the economy one of his most pressing challenges. Still, any celebrations are likely to be short-lived, with economists predicting that Germany will be hit hard later in the year by US President Donald Trump's tariff blitz. "This should not be interpreted as the beginning of a sustainable recovery," said Dirk Schumacher, chief economist at German public lender KfW, warning of "uncertainty regarding American economic policy". The Ifo institute said that the economy likely benefited in the first quarter as companies in the United States -- Germany's top trading partner last year -- rushed to import goods before tariffs kicked in this month, and the levies would weigh on growth later in 2025. The European Union is currently facing a 10-percent tariff on its exports to the United States as part of Trump's hardball trade agenda. He earlier announced a 20-percent rate on the bloc but then paused the higher levies -- on the EU and many other trading partners -- to allow for talks. In a further sign of economic weakness for Germany, data released Wednesday showed unemployment edging up to 6.3 percent in April -- the second straight monthly increase. Following two years of contraction driven by surging energy prices after Russia invaded Ukraine and post-pandemic supply chain woes, the German economy was expected to start making a modest recovery this year. But the government last week downgraded its growth forecast for 2025 to zero, blaming Trump's sweeping tariffs, in line with economic institutes who have also been slashing their estimates. Highlighting the economy's woes, Volkswagen and Mercedes-Benz -- two major players in Germany's flagship auto industry -- reported sharp falls in first-quarter profits Wednesday, and warned of the impact of US tariffs. Merz has vowed a barrage of measures to boost the economy, ranging from vastly increasing public spending to lowering corporate taxes and energy costs. He has already succeeded in leading efforts to push changes to Germany's restrictive debt rules through parliament, paving the way for massive extra outlays on defence and infrastructure, which economists say should boost the economy. But it is expected to take some time before these measures are implemented and have any kind of impact. And ING economist Carsten Brzeski warned the spending plans, "impressive as they might be, will do very little to improve the economy's competitiveness". "Modern infrastructure is essential for one of the world's largest economies, but it doesn't inherently drive innovation, sector transformation, or new growth opportunities." CDU leader Friedrich Merz is set to take over as German chancellor next week AFP Trump's tariffs threaten to upend trade between Germany and the United States AFP President Donald Trump has just celebrated the first 100 days of what is already one of the most radical and far-reaching presidencies in US history AFP
France 24
30-04-2025
- Business
- France 24
German growth better than expected but tariff turmoil looms
Gross domestic product (GDP) in Europe's biggest economy expanded 0.2 percent from January to March compared to the previous quarter, according to provisional figures from federal statistics agency Destatis. The expansion, driven by improving consumption and investment, was better than analyst forecasts and meant Germany dodged a recession -- defined as two straight quarters of negative growth -- after a contraction at the end of last year. It was rare good news for the eurozone's traditional growth engine which has been battling a manufacturing slowdown, rising costs and weak demand in key overseas markets, prompting the economy to shrink in both 2024 and 2023. The improving picture will come as a relief for incoming chancellor Merz as he prepares to take office next week, with the dire state of the economy one of his most pressing challenges. Still, any celebrations are likely to be short-lived, with economists predicting that Germany will be hit hard later in the year by US President Donald Trump's tariff blitz. "This should not be interpreted as the beginning of a sustainable recovery," said Dirk Schumacher, chief economist at German public lender KfW, warning of "uncertainty regarding American economic policy". The Ifo institute said that the economy likely benefited in the first quarter as companies in the United States -- Germany's top trading partner last year -- rushed to import goods before tariffs kicked in this month, and the levies would weigh on growth later in 2025. The European Union is currently facing a 10-percent tariff on its exports to the United States as part of Trump's hardball trade agenda. He earlier announced a 20-percent rate on the bloc but then paused the higher levies -- on the EU and many other trading partners -- to allow for talks. - Deep-rooted problems - In a further sign of economic weakness for Germany, data released Wednesday showed unemployment edging up to 6.3 percent in April -- the second straight monthly increase. Following two years of contraction driven by surging energy prices after Russia invaded Ukraine and post-pandemic supply chain woes, the German economy was expected to start making a modest recovery this year. But the government last week downgraded its growth forecast for 2025 to zero, blaming Trump's sweeping tariffs, in line with economic institutes who have also been slashing their estimates. Highlighting the economy's woes, Volkswagen and Mercedes-Benz -- two major players in Germany's flagship auto industry -- reported sharp falls in first-quarter profits Wednesday, and warned of the impact of US tariffs. Merz has vowed a barrage of measures to boost the economy, ranging from vastly increasing public spending to lowering corporate taxes and energy costs. He has already succeeded in leading efforts to push changes to Germany's restrictive debt rules through parliament, paving the way for massive extra outlays on defence and infrastructure, which economists say should boost the economy. But it is expected to take some time before these measures are implemented and have any kind of impact. And ING economist Carsten Brzeski warned the spending plans, "impressive as they might be, will do very little to improve the economy's competitiveness". "Modern infrastructure is essential for one of the world's largest economies, but it doesn't inherently drive innovation, sector transformation, or new growth opportunities." © 2025 AFP
Yahoo
25-04-2025
- Business
- Yahoo
German Business Expectations Dip, Ifo Says
Ifo President Clemens Fuest discusses the institute's latest reading on German business expectations which fell in April as US President Donald Trump's tariffs overshadowed recent optimism about a huge jump in public spending. The Ifo's overall business climate gauge rose slightly. Fuest speaks on Bloomberg Television.
