Europe's news in English

COPY LINK

OIL

Investors confident thanks to oil price plunge

Investment sentiment in Germany rose sharply in December after a rebound the previous month, driven by a weak euro and plunging oil prices, a survey found on Tuesday.

Published: 16 December 2014 12:39 CET

Investors confident thanks to oil price plunge

A steelworker at the Thyssen-Krupp plant in Duisburg. Photo: DPA

The widely-watched investor confidence index calculated by the ZEW economic institute jumped by 23.4 points in December, after rising for the first time this year in November, ZEW said in a statement.

It said there was abundant evidence that faith in Europe's top economy among financial market experts was being restored.

"This renewed confidence remains linked to the auspicious economic conditions including the weak euro and the low price of oil," ZEW president Clemens Fuest said in a statement.

”This positive trend could be seen in the recent data for German exports. But it should be noted that the current economic optimism is fostered by factors that can change quickly."

For its survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.

The sub-index measuring financial market players' view of the current economic situation in Germany also rose, by 6.7 points.

In November the ZEW headline indicator had bounced back for the first time in 2014, adding to signs that the German economy is stabilising and providing a boost for the eurozone as a whole.

After hitting a 22-month low in October, the index jumped to 11.5 points from minus 3.6 points the previous month.

Last week Germany reported that its trade surplus had grown slightly in October, with imports showing a sharper decline than exports due in part to the weaker euro.

Exports slipped by 0.5 percent in October to €97.2 billion compared to the previous month, while imports fell 3.1 percent to €76.6 billion, according to seasonally adjusted figures published by the federal statistics office Destatis.

Member comments

Log in here to leave a comment.

Become a Member to leave a comment.

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.”

Url copied to clipboard!