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ECONOMY

Industrial output decline slowed in February

German industrial output fell 2.9 percent in February from January, the economy ministry said Thursday, as demand for goods from Europe's largest economy dried up amid the global recession.

Published: 9 April 2009 14:24 CEST
Industrial output decline slowed in February
Photo: DPA

While the drop was still sharp, it was less intense than analysts had expected and represented a considerable improvement from the stunning 6.1 percent decline last month.

Economists had forecast a 3.4 percent drop in February and some analysts took the latest data as a sign that the worst could be over for Germany’s embattled industrial sector.

Martin Lueck from Swiss banking giant UBS said that it was “another very poor number, but less ugly” than the figures reported the previous month, which were the worst output data since German reunification in 1990.

“This data, albeit still incredibly poor, raises further hope that we may indeed be close to the bottom,” he said.

For its part, the ministry said the outlook for German industry was not bright.

“Given the still falling industrial orders, output will remain weak in the coming months,” the ministry said in a statement.

Data released Wednesday showed that industrial orders in Germany fell 3.5 percent in February from the January level.

Jennifer MacKeown from Capital Economics was less upbeat.

The figures “confirm that the sector is still in dire straits,” she said.

“The latest data clearly suggest that the recession is still in full swing,” she added, saying her forecast of a four percent fall in German gross domestic product (GDP) in 2009 looked increasingly over-optimistic.

Germany is facing its worst recession in over six decades, with the Organisation for Economic Cooperation and Development (OECD) predicting GDP in the world’s largest exporter will slump by more than five percent this 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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