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ECONOMY

German manufacturing soars in June

German industrial production strongly rebounded in June driven by all sectors after people took advantage of the May bank holidays to extend their time off, official data showed on Wednesday.

Published: 7 August 2013 12:58 CEST
German manufacturing soars in June
Photo: DPA

The figure for June represented a 2.4 percent increase from the outcome of the previous month which was revised slightly upwards to show a 0.8 percent drop, according to initial data from the economy ministry.

The seasonally, price and calendar-adjusted rise in industrial production widely overshot expectations of economists polled by Dow Jones Newswires, who had reckoned on a June increase of 0.3 percent.

The high jump came on the heels of May when an above-average number of so-called bridging days, when staff take an extra day or two off around a national holiday, curbed industrial production.

“All in all industrial production seems however to have overcome its phase of weakness,” the ministry said in a statement.

“Current business climate indicators point to progress in the positive development of production,” it added.

The construction sector, which had been hit by a long and severe winter, saw production grow by 1.6 percent in June, while for manufacturing, the rise was 2.2 percent, it said.

Taken over a two-month period for May and June, industrial production grew 1.3 percent compared to March-April.

Annalisa Piazza, an economist at Newedge Strategy, said the June industrial production figure suggested that the German factory sector gained some momentum in recent months.

“All in all, an encouraging report that supports the idea that Germany remained the main growing economy in Q2 in the eurozone despite some signs of sluggishness during the spring months,” she said.

The results come a day after the economy ministry said that German industrial orders, a key measure of demand for goods at home and abroad, rose 3.8 percent in June from the month earlier.

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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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