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ECONOMY

Car sales plunge in November

German new-car registrations plunged by 18 percent in November and will fall further next year, the VDA auto manufacturer’s federation said on Wednesday, bringing bad news from a key sector to an economy already in recession.

For the entire year, the federation forecast sales of just under 3.1 million vehicles, and said it expected a slump to 2.9 million in 2009. That meant German new car sales would drop in 2008 to “the weakest level since reunification” of eastern and western Germany in 1990, the federation said. A total of 233,800 new cars were registered in November, the fourth month running of falling sales, a VDA statement said.

“Car markets have taken a downward flight, which hasn’t occurred before with this speed and impact,” it quoted VDA president Matthias Wissmann as saying. “That will also have consequences for workers,” he warned during a press conference in western Frankfurt.

In Germany, where the auto sector is the country’s leading employer and exporter, both production and exports would fall back markedly in 2009, the federation said. VDA estimates that one out of every seven jobs in the biggest European economy depends directly or indirectly on the auto sector, while the German car market is also the biggest on the continent.

In many other European countries as well, automobile manufacturers and parts makers have said they planned to scale back production and some have said that furloughs and layoffs of temporary workers were to be expected as well.

French new car registrations were down 14 percent in November in raw figures and 5.0 percent when adjusted for comparable working days.

Spain and Italy showed even more dramatic falls, at nearly 50 percent and 30 percent respectively.

Luxury car sales are among those sliding lower, with wealthy Russians buying fewer Bentleys, Ferraris and other high-end vehicles as the global financial crisis reins in spending, daily Kommersant reported on Wednesday.

In the United States, auto sales plunged by 37 percent in November, industry data showed on Tuesday as General Motors, Ford and Chrysler got set to appeal to lawmakers for a massive bailout package. Executives from the Big Three will testify before Congress on Thursday and Friday. “Every manufacturer is posting awful numbers,” said Mark LaNeve, GM vice president of North America vehicle sales, service and marketing, and the group planned to cut up to 31,500 more jobs in the United States.

In Tokyo, Toyota Motor Corp. said Tuesday it would cut management bonuses by 10 percent, excluding top executives, and further reduce domestic production to cope with the slump. Toyota also reported a 34 percent drop in November US auto sales.

And new car registrations fell by 30 percent in Brazil in November on an annual basis, the national car dealers’ federation Fenabrave said, after two years of fast-paced growth.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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