Doubts grow about German economic upturn
13 April 2004
BERLIN – Putting a damper on the prospects for Germany’s economy, the prestigious DIW think tank Tuesday warned that latest orders data were a cause for concern for the country’s economic recovery, although other data hinted at improvement in some sectors.
The German Institute for Economic Research in Berlin, adding to the persistent worries about just how strong the recovery is going to be, said latest orders figures for industry did show some positive signs on the domestic front.
But orders from abroad were still burdened by the impact of the euro’s rise on currency markets, the DIW noted.
“The economy at the moment still appears to be quite feeble,” the DIW said in its latest appraisal for Germany.
It said that in the first quarter, the economy managed only a 0.2 percent pickup from the final quarter of 2003.
Among some signs of slight improvement, the DIW cited the investment goods and services sectors. Also, the retail sector was steadying itself after the downturn registered in January.
The DIW report follows on data issued by federal authorities last week showing a downturn in industrial output in February and a further rise in adjusted unemployment levels in March.
The Economics Ministry reported a 0.7 percent drop in industrial output in February from January. At the same time, new orders were up a scant 0.3 percent in February, after having fallen in January.
Meanwhile the Federal Labour Agency in Nuremberg reported that seasonally-adjusted jobless data for March showed a jump of 44,000, well above the 15,000 increase expected by economists, for the third straight monthly increase in adjusted unemployment data.
The DIW appraisal was given backing independently by two further reports on Tuesday, one about the prospects in the services sector by the business and trade confederation DIHK and another about the impact of the strong euro on exports to the United States by the Federal Statistics Office in Wiesbaden.
The DIHK in Berlin said confidence in Germany’s services sector is continuing to improve, with a survey of companies showing the highest level of optimism since 2000.
In a poll of some 9,500 companies, the DIHK said that about one- third of German services firms foresee better business prospects than was the case a year ago.
And for the first time in two years, more than two-thirds of the services firms regard their current business situation as being “good”.
But there were differences among the various sub-sectors, the DIHK said, noting that the credit and insurance firms were among the most optimistic. Transportation and real estate companies were “comparatively restrained” in their outlooks, the survey showed.
Also, the DIHK cautioned that the return of optimism in the services sector had not yet provided for any tangible plans for higher investments or employment.
In Wiesbaden, the statistics office quantified the adverse impact of the strong euro on German exports to the key US market, pointing out that exports in January were down 10.5 percent from January 2003 levels.
This downturn came after an annualised 4.1 percent drop in December and 14.1 percent falloff in November, documenting how the euro’s rise had made German export goods outside the eurozone region more expensive.