Posted: Wed Sep 06, 2006 4:13 pm Post subject: German Economy booming
The German economy is booming. Exports are up and so is real growth, not the asset inflation Washington and Wall street pretend to call growth. One would think with the euro being so strong that it would have a negative effect on European growth and a positive effect on American growth. But it isn't.
Maybe there are two good reasons. One, America has exported all of its manufacturing to China, thus has nothing to sell. Two, the remnant of American industry still uses the stone age imperial system, which nobody will buy its products no matter how cheap they appear to be.
See the two articles below:
German Orders Rise, Led by Overseas, Domestic Demand (Update2)
By Simone Meier and Rainer Buergin
Sept. 6 (Bloomberg) -- German factory orders rose more than expected in July as companies ordered more machines and plants to meet growing foreign and domestic demand.
Orders rose 1.8 percent from June, when they increased a revised 0.2 percent, the Berlin-based Economy Ministry said in a faxed statement today. May's figures were also revised up ``strongly,'' it said. Economists expected a gain of 1 percent, the median of 43 forecasts in a Bloomberg News survey showed.
The German economy is set for the fastest expansion since 2000 as companies increase production and hiring to meet orders. The European Central Bank is still considering raising borrowing costs next year, council member Axel Weber signaled today.
``That was a good to start to the third quarter,'' said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt. ``Gross domestic product will grow a solid 0.3 percent in the third quarter from the second. That strengthens the ECB's position to raise interest rates further, beyond its October meeting.''
German companies' earnings are increasing on rising demand at home and abroad. Domestic orders rose 1.2 percent in July after declining 1 percent in June while export orders gained 2.5 percent after rising 1.4 percent, according to the Economy Ministry.
Orders for plants and machinery jumped 27 percent in July from a year earlier, the VDMA industry group said Aug. 31. The benchmark DAX Index has gained about 8 percent this year.
Stronger Growth
MAN AG, Europe's No. 3 truckmaker, on Aug. 31 reported higher orders for July and August after second-quarter profit more than doubled. Chief Executive Officer Hakan Samuelsson reiterated in Munich a prediction that sales at the commercial-vehicle division will remain at a ``high level'' in the third and fourth quarters.
The ECB on Aug. 31 signaled it's ready to raise the main rate from 3 percent after four increases since early December. Weber today said a further increase in rates is ``advisable'' and the bank needs to show ``strong vigilance'' on prices.
The bank, which increased its projections for growth last week, is concerned that as growth picks up, workers will demand wage increases to compensate for higher energy costs, entrenching faster inflation. The price of crude rose to a record $78.40 on July 14 and has gained 62 percent in the past two years.
Higher oil prices and a stronger euro may damp sales abroad in the coming months, while a higher value-added tax may hurt the domestic economy next year.
Chancellor Angela Merkel 's plan to raise the value-added tax, a levy on sales, to 19 percent in January from 16 percent comes as the domestic economy is just recovering from record unemployment last year. In addition, oil prices close to $70 per barrel are sapping global growth, and the euro's 8.5 percent gain against the dollar this year is making exports less competitive.
Sentiment Drops
German executives' expectations of economic conditions six months from now dropped in August to the lowest since December, the Munich-based Ifo Institute said Aug. 24. Investors were the most pessimistic in five years. Volkswagen AG, Europe's largest carmaker, said Sept. 4 that it has ``far to go'' to meet 2008 financial targets.
European retail sales growth slowed for a third month in August, tempered by oil costs and higher interest rates, the Bloomberg purchasing managers index showed. The measure of retail sales in the dozen euro nations fell to a seasonally adjusted 52.3, the lowest in five months, a survey of more than 1,000 retail executives compiled by NTC Economics Ltd. showed today.
Forecasts Raised
A jump in investment in construction and equipment fueled the fastest German economic expansion in five years in the second quarter. Growth may reach 2.4 percent this year before slowing to 1 percent in 2007, the Kiel-based Institute for World Economics said Aug. 31. Weber, who is also president of the Bundesbank, expects German growth of at least 2 percent this year and around 1.25 percent in 2007.
The European Commission today raised its growth outlook for the European Union, the dozen euro nations and Germany. Europe's largest economy will grow 2.2 percent this year, the EU's economic watchdog said, lifting its prediction from 1.7 percent in May. Still, ``the balance of risks become tilted to the downside in 2007,'' it said.
In a two-month comparison, which smoothes out short-term fluctuations, manufacturing orders rose 0.7 percent in June and July from April and May, with foreign orders up 1.3 percent and domestic orders up 0.1 percent, today's report showed.
To contact the reporters on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net .
Last Updated: September 6, 2006 08:00 EDT
German economy expected to grow 2 percent this year
Germany's gross domestic product (GDP) would probably grow at least 2 percent in 2006, pushing down the federal budget deficit below the limits set by the European Union for the first time since 2002, Finance Minister Peer Steinbrueck said Tuesday.
He made the forecast in the lower house of parliament, the Bundestag, at the beginning of its debate on the 2007 federal budget.
"We are experiencing a classic economic upswing," he added.
The government had previously forecast a growth rate of around 1.6 percent for the year.
Thanks to higher than expected tax revenue, Steinbrueck said Germany was expected to post a federal budget deficit of 2.8 percent of GDP this year, below the 3 percent standard set in the EU stability and growth pact. Germany had exceeded the limit for 4 years in a row.
"A realistic (deficit) figure is 2.8 percent and this is what we will report to Brussels," he said.
On the same day, the European Commission, the executive body of the EU, hailed the report as "good news."
Posted: Wed Sep 06, 2006 5:51 pm Post subject: Re: German Economy booming
All seemingly good news for Germany except this one:
Euric wrote:
Chancellor Angela Merkel 's plan to raise the value-added tax, a levy on sales, to 19 percent in January from 16 percent comes as the domestic economy is just recovering from record unemployment last year. In addition, oil prices close to $70 per barrel are sapping global growth, and the euro's 8.5 percent gain against the dollar this year is making exports less competitive.
What IS she thinking??!!!!??? Can any of our German members explain? This tax has always proven to be bane of economy, and it hurts the poor badly, since this tax is added to pretty much all goods, and poor people have to eat and wear clothes like the rest of us. Unless there is a good reason for this, she lost a lot of credibility in my eyes.
Posted: Thu Sep 07, 2006 12:12 am Post subject: Re: German Economy booming
Longsword wrote:
All seemingly good news for Germany except this one:
Euric wrote:
Chancellor Angela Merkel 's plan to raise the value-added tax, a levy on sales, to 19 percent in January from 16 percent comes as the domestic economy is just recovering from record unemployment last year. In addition, oil prices close to $70 per barrel are sapping global growth, and the euro's 8.5 percent gain against the dollar this year is making exports less competitive.
What IS she thinking??!!!!??? Can any of our German members explain? This tax has always proven to be bane of economy, and it hurts the poor badly, since this tax is added to pretty much all goods, and poor people have to eat and wear clothes like the rest of us. Unless there is a good reason for this, she lost a lot of credibility in my eyes.
It's not actually her idea or her party's, but a nod to the SPD who she is sharing power with. Plus, Germany has to bring their budget deficit down below the 3% maximum as laid-out in The Maastricht Treaty and it was either increase VAT or cut social spending. German governments love to tax & spend. This is the result. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Thu Sep 07, 2006 2:44 am Post subject: Re: German Economy booming
Madpaddy wrote:
post.
Yes, I'm there 1000 posts of mostly inane ramblings.
Congratulations. I hear Bono & U2 crew are going to pull out of Ireland if you raise taxes on royalties? How's that for grateful, eh? But Ireland has benefited from tax arbitrage within the EU, so I guess a higher VAT is just some payback or not? _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Thu Sep 07, 2006 5:11 am Post subject: Re: German Economy booming
Hi MrBill,
Our high VAT rate is to compensate for our relaively low (by European standards) of income tax. Mind you the cost of EVERYTHING here is higher than in Europe.
I took my holidays in France this year (again) and was still amazed at the disparity in prices.
Cost of 2000 sq ft house on 2 acres in France near all amenities 180,000 .
Cost of similar in Ireland 750,000.
Cost of good bottle of wine in France 2
Cost of silmilar in ireland 10
Cost of 3 course meal with wine for 2 in France in good restaurant 50
Joined: Sep 29, 2004 Posts: 2330 Location: Pennsylvania, USA
Posted: Thu Sep 07, 2006 6:05 am Post subject: Re: German Economy booming
Maybe was can retitle this thread : "German taxes booming" _________________ "That's the problem with mercy, kid... It just ain't professional" - Fast Eddie, The Color of Money
Posted: Thu Sep 07, 2006 6:58 am Post subject: Re: German Economy booming
Madpaddy wrote:
Hi MrBill,
Our high VAT rate is to compensate for our relaively low (by European standards) of income tax. Mind you the cost of EVERYTHING here is higher than in Europe.
I took my holidays in France this year (again) and was still amazed at the disparity in prices.
Cost of 2000 sq ft house on 2 acres in France near all amenities 180,000 .
Cost of similar in Ireland 750,000.
Cost of good bottle of wine in France 2
Cost of silmilar in ireland 10
Cost of 3 course meal with wine for 2 in France in good restaurant 50
Cost in Ireland 100
and so on.
Given Ireland was economically so depressed for so long that its major export was its peoples, how much of the recent price inflation in Ireland was due to under investment in infrastructure that meant the cities and the towns were simply unable to cope with the growth once the economy turned around and inward FDI as well as financial flows (Dublin tax haven status) started to re-inflate the economy? And do you see prices levelling off as supply catches up to demand?
I have to admit. I have never been to Ireland unfortunately. However, it seems that Alberta is also 'suffering' from being caught similarly flat-footed in the most recent energy boom, and predictably many stop gap measures that are absolutely necessary in the short-term (like urban sprawl) will lead to longer term problems (like dependence on the auto as primary means of commuting/transport). It is a shame that the Godsend of an economic miracle has to be wasted when it could have paid for so much forward thinking development had it been properly planned and implemented. That is rarely the case.
RE Germany and taxes booming. They had turned the corner and were lowering taxes, but they really bunged it up post reunification and the lead up to the euro, so now they are having to rely on stop gap measures like the VAT to plug fiscal holes, but the real reason is that Germans are 'still' wealthy enough that they resist change; they have strong work councils and unions that oppose everything; and perhaps the Germans do not see the factories that are not being built in Germany, but being built elsewhere by German companies instead. To lose a factory and its jobs is one thing, not to have it in the first place is another. It is still an economical loss, just less visible. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Thu Sep 07, 2006 10:59 am Post subject: Re: German Economy booming
Longsword wrote:
All seemingly good news for Germany except this one:
Euric wrote:
Chancellor Angela Merkel 's plan to raise the value-added tax, a levy on sales, to 19 percent in January from 16 percent comes as the domestic economy is just recovering from record unemployment last year. In addition, oil prices close to $70 per barrel are sapping global growth, and the euro's 8.5 percent gain against the dollar this year is making exports less competitive.
What IS she thinking??!!!!??? Can any of our German members explain? This tax has always proven to be bane of economy, and it hurts the poor badly, since this tax is added to pretty much all goods, and poor people have to eat and wear clothes like the rest of us. Unless there is a good reason for this, she lost a lot of credibility in my eyes.
She is thinking that the Germans want services and this is the best way to pay for them, in the long term. There is no petroeuro yet, so she can't rely on exporting Germany's debt to foreign investors. But would that be wise? Look at the US! This is exactly what they did to create an illusion of prosperity and the result is a nation on the verge of bankruptcy.
A great leader is someone who looks far into the future and does what may seem wrong at the time but in the long term will save Germany and Europe from a future bankruptcy that they will never recover from.
Posted: Thu Sep 07, 2006 11:06 am Post subject: Re: German Economy booming
Madpaddy wrote:
Cost of 2000 sq ft house on 2 acres in France near all amenities 180,000.
Cost of similar in Ireland 750,000.
And that right there is the reason I decided to abaondon my plans to immigrate to Ireland. _________________ The whole of human history is a refutation by experiment of the concept of "moral world order". - Friedrich Nietzsche
Posted: Thu Sep 07, 2006 11:11 am Post subject: Re: German Economy booming
MrBill wrote:
It's not actually her idea or her party's, but a nod to the SPD who she is sharing power with. Plus, Germany has to bring their budget deficit down below the 3% maximum as laid-out in The Maastricht Treaty and it was either increase VAT or cut social spending. German governments love to tax & spend. This is the result.
Or more truthfully, Germans want and expect the government to provide certain services for them and the government obliges.
The US is no different, except the rich who run the government spend on projects that benefit the rich, such as wars of aggression. The rest of the masses are expected to fend for themselves. Of course, taxation is limited to keep the masses from revolting, thus the cost is sold as bonds to petrodollar holders, giving the illusion that the US doesn't spend frivolously and forcing the peasants to pay. When the foreign investors start to demand payment for their investment, then we will see who were the biggest tax and spenders.
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