BERLIN: Germany’s leading industry groups said on Wednesday that Britain’s departure from the European Union and trade disputes triggered by US President Donald Trump’s ‘America First’ policies were posing the biggest risks to growth and prosperity.
The German economy, Europe’s largest, is expected to post its weakest growth rate in many years in 2018 as exporters are facing headwinds from abroad. But vibrant domestic demand means many companies are still able to expand business.
In a survey conducted by Reuters, the heads of Germany’s leading industry associations said they did not see the economy entering a recession and that most forecasts were predicting a solid growth rate of around 1.5 percent for 2019.
But the industry associations said the economic woes of company executives were increasing and the government should do more to help them, for example by lowering corporate taxes and investing more in digital infrastructure.
“The biggest risk in the short term is Brexit,” said Dieter Kempf, president of the BDI industry association.
If Britain left the EU in March without any agreement on its future relations with the bloc, this would create massive uncertainties for trade and business, Kempf warned.
“The British economy would face the direct threat of a recession which would indirectly also affect Germany,” Kempf said.
Holger Bingmann, head of the BGA trade group, said Brexit was the “most urgent problem for the German economy” while an escalation of international trade disputes sparked by the United States could potentially derail the economic upswing.
DIHK President Eric Schweitzer said German companies are still worried about the US imposing higher import tariffs on European cars. “The threat of car tariffs is still on the table,” Schweitzer warned.
It was vital that both sides increased their efforts to find a solution to the trade dispute through negotiations that ideally would lead to lower tariffs, Schweitzer said.
The German economy likely grew by around 1.5 percent this year, compared with 2.2 percent in 2017.
German industry views Brexit, Trump as biggest risks to economy
German industry views Brexit, Trump as biggest risks to economy
- The German economy, Europe’s largest, is expected to post its weakest growth rate in many years in 2018
- If Britain left the EU in March without any agreement on its future relations with the bloc, this would create massive uncertainties for trade and business
Kuwait PMI climbs to 54.5; Egypt falls to 48.9 in February: S&P Global
RIYADH: Kuwait’s non-oil private sector continued to expand in February, supported by growth in output and new orders, while business conditions in Egypt weakened, an economy tracker showed.
According to the latest Purchasing Managers’ Index surveys released by S&P Global, Kuwait’s PMI rose to 54.5 in February from 53 in January, extending the current run of improving business conditions to a year and a half.
The expansion in Kuwait’s non-oil sector aligns with a broader trend across the Gulf Cooperation Council region, where countries are pursuing diversification strategies to reduce reliance on crude revenues.
The surveys were conducted before regional tensions escalated following US and Israeli strikes on Iran and Tehran’s retaliatory attacks across the Gulf, which have since disrupted markets and energy trade.
Commenting on the February survey, Andrew Harker, economics director at S&P Global Market Intelligence, said: “Growth momentum strengthened in Kuwait’s non-oil private sector in February as companies were again successful in securing new business.”
According to the report, key factors supporting expansions in new orders and business activity included the provision of good-quality products at competitive prices and successful marketing efforts.
The rate of job creation was modest in February and unchanged from January.
Firms continued hiring staff for advertising and project-related work, resulting in a twelfth consecutive monthly increase in employment.
“The main issue facing firms at present is being able to grow workforce numbers quickly enough to keep up with workloads,” said Harker.
He added: “With backlogs rising at a fresh record pace for three months in a row now, fulfilling customer requirements in a timely manner is becoming more difficult, although companies did expand their purchasing activity at a near-record pace in February to help make sure the necessary materials are available going forward.”
Overall input cost inflation hit a nine-month high in February, with both purchase prices and staff costs rising at faster rates compared to January.
The report added that some companies increased their selling prices in response to higher input costs.
Regarding the outlook, companies expressed optimism, with sentiment reaching a 26-month high in February, driven by product variety, competitive pricing and good-quality customer service.
Egypt’s non-oil sector contracts
Egypt’s non-oil private sector contracted in February, driven by rising costs and softer demand, according to S&P Global.
The country’s PMI fell to 48.9 in February from 49.8 in January.
Although the reading remained below the 50 neutral threshold, it was still above its long-run average of 48.3, the report said.
Output declined for the first time in four months in February, and all five sub-components of the PMI indicated weaker business conditions compared to January.
“The February PMI data pointed to a slowdown in the Egyptian non-oil private sector as activity curtailed and new order volumes weakened,” said David Owen, senior economist at S&P Global Market Intelligence.
That said, he added that the dip followed an unusually strong run in business performance, and that the latest figures are consistent with annual GDP growth of approximately 4.5 percent.
Egyptian non-oil companies also reported a decline in order book volumes during the month.
Sales fell across manufacturing, wholesale and retail, and services, while construction was the only monitored sector where new orders improved.
Employment fell for the third consecutive month in February, though at a slower rate, as companies continued active job cuttings and hiring freezes.
The report revealed that cost pressures accelerated across the month, driven by rising global commodity prices, particularly oil and metals.
Selling prices, however, were up only fractionally, with just a small proportion of firms choosing to pass cost increases onto their customers.
“Egyptian non-oil companies were notably exposed to the uplift in global commodity prices, with firms emphasising the impact of higher prices for oil and metals, resulting in the sharpest increase in business costs for nine months and hitting margins at a time when firms are reluctant to raise their selling prices,” said Owen.
He concluded: “Firms will therefore be keen to see commodity markets settle, especially as recent periods of high input cost inflation have typically constrained business output.”
