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ECONOMY

Auto sales surge on junk car premium

German new car sales leapt by 22 percent in February from the same month a year earlier, mainly owing to a bonus offered to those who turned in old cars, while exports slumped, figures released Tuesday by the sector federation VDA showed.

Published: 3 March 2009 17:00 CET

A total of 277,800 vehicles were sold in Germany last month, according to the VDA data, “the strongest level of February sales in 10 years,” federation president Matthias Wissmann was quoted as saying.

“We expect domestic sales will be higher for the entire first quarter,” Wissmann said.

The jump was explained by a government incentive worth €2,500 ($3,150) to scrap an old clunker for a new car that pollutes less and keeps German automakers going during a severe sector crisis worldwide.

A modification of an environment tax on cars, which is now based in part on the vehicle’s carbon dioxide emissions, also boosted sales, VDA said.

“New car registrations have swung back into positive territory for the first time in six months,” the statement said. “We may be able to reach the level of three million this year, despite the difficult environment,” it added in a tone that contrasted sharply with global gloom that pervades the sector in general.

Until now, VDA had forecast full-year sales of 2.9 million vehicles in 2009, which would represent a drop of 6.0 percent from the level in 2007. Export sales, which used to be the market’s main source of support, collapsed in February, losing 51 percent while production was cut by 47 percent, VDA said.

But for the moment, domestic sales were giving German automakers a fillip. Opel, plunged into crisis by struggling parent US giant General Motors, said last month it was increasing output at a plant because of strong demand for its Corsa compact model.

Germany, the biggest European economy, has done better so far than many other major auto producing nations.

In France, new car registrations have fallen by 13.1 percent despite a similar government incentive, while in Spain they were off by 48.8 percent and in Japan by 32.4 percent.

Wissmann acknowledged that “we are far from a sustainable rebound in global auto markets,” and German car makers have cut back on temporary workforces to adapt to falling demand by reducing their stocks.

But he remained optimistic and said that if the German government’s plan were replicated elsewhere, “we might see a rebound in global auto sales in the second half of the year.”

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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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