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ECONOMY

Industrial orders surge as economy rebounds

Demand for German manufactured goods soared 5.0 percent in March driven by both domestic demand and exports, in a further sign of recovery in Europe's top economy, provisional figures showed Thursday.

Published: 6 May 2010 18:13 CEST
Industrial orders surge as economy rebounds
Photo: DPA

The data released by the Economy Ministry was far better than expected by economists polled by Dow Jones Newswires who had forecast a rise of just 1.0 percent following flat figures in February compared to the previous month. The ministry said the growth was seen across a “broad front.”

“That indicates a continuation and consolidation of the recovery process for industrial production,” it said in a statement.

“Business confidence indicators, which also recently improved, also point in this direction.”

The closely watched Ifo index last month showed business confidence in Germany rising sharply to a near two-year high. However retail data released Tuesday showing a 2.4-percent plunge in March raised fears that German gross domestic product had contracted in the first quarter of the year.

The data released Thursday said foreign demand for industrial products in Germany, the world’s second largest exporter after China, rose 4.7 percent in March, with even stronger growth in orders at home of 5.4 percent.

Orders from the other 15 countries in the eurozone rose 9.6 percent in March from February, while orders from beyond the currency bloc gained 1.3 percent.

Economist Alexander Koch from UniCredit Group said Europe could take heart in the data.

“The latest jump in orders from the EMU neighbour countries, which still account for the bulk of German exports, confirm that, despite the Greek debt crisis and the feared contagion to other member countries, the revival in global industrial activity remains broad based,” he said.

Demand for consumer goods, however, was weak, falling 1.9 percent in keeping with a long-term trend. Berlin has faced pressure from eurozone trade partners for policies that would boost imports from neighbours.

Analyst Carsten Brzeski of ING Bank said the figures marked an “impressive comeback.”

“After the weather-driven temporary dip at the turn of the year, at least the German manufacturing sector has picked up speed again,” he said in a statement.

“Whether the pick-up came just in time to prevent another quarter of negative growth will only become clear next week with the first GDP estimate to be released.”

Brzeski said he would also be looking to the release of March data on industrial production Friday to indicate whether Germany’s economic “hibernation” had ended.

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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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