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ECONOMY

Business sentiment hits all-time low for December

Business sentiment dropped in Germany for the seventh straight month to a record low point of 82.6 points in December, the key Ifo index showed on Thursday, while business activity fell sharply across the 15-nation eurozone.

Published: 18 December 2008 10:36 CET
Business sentiment hits all-time low for December
Photo: DPA

The monthly business climate index calculated by Munich-based economic research institute Ifo fell in December from 85.8 points in the previous month.

The previous all-time low of 84.8 points had been set in February 1993.

Analysts polled by Dow Jones Newswires had expected the business sentiment indicator to fall to 84.1 points.

A sub-index of the Ifo survey that measures the current situation in Germany was also lower at 88.8 points, compared with 94.9 in October, while expectations for the next six months also dropped to a record low of 76.8 points from 77.6 points, the institute said.

Analysts had forecast levels of 91.7 and 77.2 points, respectively.

On Tuesday, a eurozone purchasing managers’ index (PMI) for December compiled by data and research group Markit fell to 38.3 points, its lowest level in the survey’s 10-year history.

Markit said that the index’s fall marked the seventh month running of contraction in private sector output, which is indicated by a reading of less than 50 points.

In Germany, the world’s leading exporter, the auto and chemical sectors have been especially hard hit by the global economic slowdown, throwing it and the eurozone into a recession that is likely to last well into 2009.

Deputy economy minister Walther Otremba told AFP on Wednesday that Germany might see economic activity contract by up to 3.0 percent next year, which would mark the worst recession in its post-war history.

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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.

Published: 30 May 2023 15:46 CEST
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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