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ECONOMY

Industrial orders gain on domestic demand

German industrial orders rose by 1.6 percent in October from their level in September, Economy Ministry data showed on Tuesday, slightly below analyst expectations.

Published: 7 December 2010 17:54 CET
Industrial orders gain on domestic demand
Photo: DPA

Germany has the biggest economy in Europe and is heading for record growth this year, a track nonetheless supported by this latest data.

Analysts polled by Dow Jones Newswires had forecast a seasonally-adjusted rise of 1.8 percent following a sharp drop of 4.0 percent in September. Dow Jones had initially given the analyst forecast as an increase of 0.8 percent.

A breakdown of the numbers showed that industrial orders from within Germany gained a solid 2.4 percent on the month while those from abroad were up by 0.8 percent.

Orders from the rest of the eurozone fell however by 0.9 percent, the second consecutive monthly drop and another sign of an emerging two-speed recovery in the 16-nation bloc.

The overall rebound bodes well for stronger industrial output in the fourth quarter of 2010 however and should help Germany post its best full-year growth since the country was reunified in 1990.

A German central bank forecast last week saw economic activity expanding by 3.6 percent this year followed by growth of 2.0 percent in 2011.

The economy has bounced back from its worst post-war recession in 2008-2009 owing to robust global demand for its automobiles and high-quality industrial goods, and is starting to get help on the domestic front as well.

Ultra-low eurozone interest rates encourage business investment and falling unemployment has begun to underpin household consumption, often the weakest

link in the German economic chain.

ING senior economist Carsten Brzeski noted that “even if demand for German products was to slow down in the near future, German companies have piled up enough backlogs to keep production running smoothly throughout 2011.”

AFP/mry

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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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