It is gloomy among German investors. They assess the German economic situation much worse than before, according to research by the ZEW economic institute. Western European macroeconomist Erik-Jan van Harn of Rabobank understands this sentiment. “It wasn’t a complete surprise.”
According to Van Harn, even the data that Rabobank has been working with recently cannot be called very positive. Especially in industry, demand seemed to plummet and few new orders came in. “Especially from abroad,” explains Van Harn. “The Chinese economy is slowing down quite a lot, and this ultimately affects German exports and thus German factories.”
“China’s economy is slowing down and this will eventually affect German exports”
According to Van Harn, the fact that German investors are losing confidence can be seen as an “economic indicator”. The ZEW Institute checked with some 350 experts what their expectations are, “and in general this is a good indicator.”
Fear
According to French economist Olivier Blanchard, Germans are generally very quick to get nervous about high inflation, a holdover from postwar German hyperinflation. At an inflation rate of 1.9 percent, stress would already be in place, and this can be seen in consumer spending, according to Van Harn. “Although it applies to more countries than just Germany, Germany is a leader in this,” he says. ‘Over the last couple of quarters, you’ve seen consumer spending contract significantly. So cut a lot.’
And not just in consumer spending, he points out. It also has an effect on other parts of the economy. For example, the ECB has to raise interest rates, which means there will be less investment. “As interest rates are raised, the currency will get stronger,” Van Harn continues. ‘This in turn means that the export position suffers. So inflation actually affects the economy in many different ways. That’s why they didn’t do very well.’
Source: BNR
Sharon Rock is an author and journalist who writes for 24 News Globe. She has a passion for learning about different cultures and understanding the complexities of the world. With a talent for explaining complex global issues in an accessible and engaging way, Sharon has become a respected voice in the field of world news journalism.
