German data this week has been mixed but Deutsche
Bank began the week with a report Monday saying the economy stagnated in the
second quarter and the outlook for the second half of the year is bleak.
The German business cycle is losing its shine and
economic growth likely suffered a worse setback in Q2 than initially presumed
according to the economists. They added that the best second quarter performance
would be stagnation but they could no longer rule out a minimal decline.
Global economic conditions do not point to dynamic
growth in H2. In particular, the tougher sanctions on Russia and the risk of
further escalation of the conflict are set to weigh on business sentiment and
investment activity in spite of Russia's low share in German exports.
which account for up around 3.3% of total German exports, fell by 15% in the
first five months of 2014 compared with the same period last year, according to
Germany's Chamber of Industry and Commerce (DIHK).
As regards the key trading partners of Germany,
Russia ranked eleventh in 2013 (see chart below) with the value of the goods
traded amounting to €76.5bn. Germany exported goods to the value of €36.1bn to
the country. The main export goods were machinery (23%) and motor vehicles,
trailers and semi-trailers (21%).
Imports from the Russian Federation amounted to €40.4bn. Crude oil and natural
gas accounted for 72% of the imports. Thus roughly 31% of the total German
crude oil and natural gas imports came from Russia.
DB in its report says that the debate triggered by
ECB and Bundesbank comments about higher wage increases in Germany is likely to
have a similar impact to the Russian crisis, even though the substance of the
statements is less spectacular, on closer inspection, than the media hype. "As
uncertainties abound we have decided to refrain for now from making a downward
revision to our full-year forecast of 1.8% GDP growth."
The economists say that a "major" revision of the
national accounts will be carried out in September. Three changes will be
particularly important in quantitative terms: the more precise definition of
sectors, especially of the government sector, as well as the classification of
military expenditure and expenditure on research and development as capital
formation. Overall, the revision could mean that the level of GDP could be
boosted by approximately 3%. "However, growth revisions will likely be limited
as these are mostly level effects. A positive side-effect of the revision:
per-capita GDP will rise by more than EUR 1,000 and the investment ratio by over
2%age points of GDP, while Germany's government debt ratio will fall by 2.5%age
DB says the outlook for the second half of the year
However, the final Markit
Germany Composite Output Index (PMI;
purchasing managers' index surveys) - - which measure the combined output of the
manufacturing and service sectors -- rose from 54.0 in June to 55.7, signalling
accelerated growth in total private sector output. Private sector employment
also rose at a slightly sharper rate, stretching the current spell of continuous
job growth to nine months. The amount of new work received by German service
sector companies increased since the previous month, but the rate of growth
eased slightly and was the weakest since April.
Companies operating in the Post & Telecommunications
sub-sector saw the steepest increase in new business. Higher demand meanwhile
encouraged service providers to increase their workforce numbers in July.
Employment levels have now risen for nine months in a row and the rate of job
creation accelerated to the highest since February. Post & Telecommunications
companies saw the sharpest rise in payroll numbers.
The Germany PMI is based on original survey data
collected from a representative panel of 1,000 companies based in the German
manufacturing and service sectors.
In June 2014, industrial production rose
by 0.3% from the previous month on a price, seasonally and working day adjusted
basis according to Destatis, the federal statistics office. In May 2014, it
decreased a revised 1.7% from April 2014. Production in industry excluding
energy and construction grew by 0.1%.
German factory orders dipped in June
compared to the previous month due to a decrease of large orders.
Destatis said Wednesday that industrial orders were 3.2% lower than in May, when
they also fell by 1.6%
Domestic orders dropped 1.9% and those from countries outside the Eurozone fell
New orders from other countries in the Eurozone declined by 10.4%.
German imports rose at their fastest rate in over
three years in June, suggesting that domestic demand remains strong in
Europe's biggest economy.
Data Friday from Destatis showed that seasonally adjusted imports rose by
4.5% on the month, recovering from a decline in May. It was the strongest
month-on-month rise since November 2010
Goods exports were valued at €93.4bn and imports
s €77.0bn in June 2014 with exports rising by 1.1% and imports by 2.1% in June
2014 on June 2013. After seasonal adjustment, exports increased by 0.9%.