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Topic: Inflation

Germany's booming construction sector raises 2018 sales forecast

The article shows that Germany is facing inflation  due to the increase in demand for real estate, increased investments in buildings and higher state spending on infrastructure. This is an example of cost-push inflation

Cost push-inflation happens when there is an increase in the cost of productions. In this case the increase in the cost of production is because of the higher construction prices caused by capacity constraints, labour shortages and rising wages. There is a shortage of resources, thus the general price level in the economy is "pushed up" by the pressure on the cost of production.

In the article, it says "the nominal sales is expected to experience a growth of 6 per cent this year, up from the 4 per cent it had projected in January. This would bring overall sales volumes close to levels last seen during the boom times. Germany is enjoying a construction boom thanks to a real estate bonanza, increased company investment in industrial buildings and higher state spending on roads, bridges, ports and railways." The increase in demand for construction has resulted in a shortage for resources and labor. Scarcity is happening in this case.

Overall, the inflation in Germany caused by construction has resulted in an increase in prices of goods and services, casing a rise in wages which further causes and increase in prices of goods and services, which ultimately results in a further rise in wages.

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Berlin

GERMANY'S construction companies are benefiting from soaring demand for real estate, increased investments in buildings and higher state spending on infrastructure, the HDB Construction Industry Association said on Wednesday as it raised its sales forecast.

The construction sector body, which represents large industrial companies such as Hochtief, said it now expects nominal sales growth of 6 per cent this year, up from the 4 per cent it had projected in January. That would bring overall sales volumes close to levels last seen during the boom times after the reunification of East and West Germany in 1990 and the economic upswing in the east of the country in the mid-1990s.

Higher construction prices caused by capacity constraints, labour shortages and rising wages mean that real sales are likely to grow by about 2 per cent this year, HDB added.

German unions and employers last week agreed on an inflation-busting pay increase of about 6 per cent for more than 800,000 construction workers, the strongest wage deal sealed so far this year in Europe's biggest economy.

Germany is enjoying a construction boom thanks to a real estate bonanza, increased company investment in industrial buildings and higher state spending on roads, bridges, ports and railways. The upswing in construction has been encouraged by the European Central Bank's ultra-low interest rates, a growing urban population and high immigration over the past five years.

The sector is also helping to propel overall economic growth. In the first quarter, investments in construction were one of the biggest drivers of a gross domestic product expansion of 0.3 per cent, data showed on Tuesday. In housing construction, nominal sales jumped 27 per cent on the year in January and February, HDB said, adding that strong order books were pointing to a continuation of the boom.

The overhang of pending residential building permits increased to more than 400,000, the body said, suggesting that the sector will continue to drive growth in the coming months. REUTERS

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Germany's booming construction sector raises 2018 sales forecast

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GERMANY'S construction companies are benefiting from soaring demand for real estate, increased investments in buildings and higher state spending on infrastructure, the HDB Construction Industry Association said on Wednesday as it raised its sales forecast. Read more at The Business Times.

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Article 1: https://www.businesstimes.com.sg/real-estate/germanys-booming-construction-sector-raises-2018-sales-forecast
Article 2 https://www.wsj.com/articles/the-riddle-of-the-eurozones-missing-inflation-1525635726

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Topic: GDP

German GDP growth disappoints in first quarter of 2018.

It is made known in the article that the German economy is growing slower than what had been forecasted in the first three months of the current year. It was predicted by analysts that the GDP will grow by 0.4%, however, it was growing at half the speed, which is the least for more than a year. Moreover, the amount of spending from the government lowered and both imports and exports decreased compared to the last quarter of the previous year, resulting in the fall of real GDP as well.

GDP is the market value of all final goods and services produces in an economy. It can be calculated using the expenditure approach, which is to sum up the personal consumption expenditure, gross private domestic investments, government expenditure on goods and services, and net exports. Therefore, even though this fall in the GDP may be slight but it is a signal that an economic slowdown may happen in the eurozone and it did strike fear for the country. Similarly, investors are not very glad of this signal.

Although the statistics might seem to not be a big problem, Germany has to be wary and start to come up with solutions to fix what may come. Concluding from the article, a fall in real GDP is already a symptom of a recession. Due to this, the government should implement some policies that may enable the economy to rise again. However, if the economy continues in this trend, not just the statistics will be affect, it also results in the rise of unemployment rate, which links back to the first article.

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Containers at the harbour in Hamburg. Photo: DPA

The German economy grew slower than analysts had forecast in the first three months of 2018, federal statistics authority Destatis said Tuesday, in a result likely to stoke fears of a eurozone slowdown.

Europe's powerhouse expanded by 0.3 percent quarter-on-quarter between January and March, adjusting for price, seasonal and calendar effects, federal statistics authority Destatis said.

That was half the pace seen in the previous three months, and analysts surveyed by data company Factset had predicted growth of 0.4 percent.

Destatis highlighted "positive impulses" from the domestic economy, as firms increased investments in buildings and equipment and households slightly increased consumer spending.

But government outlays fell slightly for the first time in almost five years, slowing growth, while both imports and exports fell back over the quarter compared with October to December.

After an unexpectedly strong year for the 19-nation single currency area in 2017, Germany's weaker first-quarter growth follows a run of economic data suggesting a slowdown could be on the way for the eurozone.

Meanwhile, fears linger that the European Union could be headed for a trade showdown with US President Donald Trump.

"The German economy lost a lot of momentum in Q1," Oxford Economics analyst Oliver Rakau tweeted.

"Part of the weakness will be reversed as transitory factors fade, but we think there is more to it."

SEE ALSO: German economy in 2017 grew at highest rate in six years

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German GDP growth disappoints in first quarter of 2018

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Containers at the harbour in Hamburg. Photo: DPA The German economy grew slower than analysts had forecast in the first three months of 2018, federal statistics authority Destatis said Tuesday, in a result likely to stoke fears of a eurozone slowdown.

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German Jobs bonanza pushes unemployment to record low.

Topic: Unemployment

The article states that Germany's record rate hit an all time low, as of  December 2017 it was at 5.7%. (more specifically  cyclical unemployment.) The economy is expected to grow more in 2018. Due to the strengthening and growing economic performance of the country, the demands for jobs will be higher hence more jobs will be created for the people of Germany thus cyclical unemployment will drop and the country is at full employment and will only be experiencing natural rate of unemployment thus it will lead to an upswing in the business cycle

However despite this increase in unemployment, we must note that the quality of workers and their standard of living are still relatively low and stagnant.  With many workers still remaining in low-wage jobs, and even though the German labor union are seeking to capitalize on the job boom to push for huge salary increases in wage talks with the employee, however wage increase are unlikely to occur in the near future.
hence this bring out the possibility of future structural unemployment, With the German labor force, primarily consisting of many low-wage job positions, may find themselves being in a unfavourable position or will be threatened if the company were to upgrade their processes and displace all manual labor with the most advanced technology as that will help the company save cost hence only workers with skills and also able to operate those machinery will be able to keep their jobs in such scenario, and workers will be retrenched if the machinery is able to replace you on  what you are doing which is only manual labor. Thus the government should consider adopting skills-upgrading courses and retraining to improve the quality of the workforce so that workers will not be abandoned by the workforce and that they will stay marketable to employers.
Thus if the economy were to experiencing further growth it will lead to more jobs being created and thus wages may fall further,thus creating a nation full of unskilled workers that are not prepared to handle the challenges of the future.

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BERLIN (Reuters) - Germany's unemployment rate hit a record low as its jobless total fell more than forecast in December, underpinning a broad-based economic upswing that augurs well for further strong growth in 2018.

Consumers in Europe's biggest economy are reaping the benefits of a jobs bonanza accompanied by rising real wages and ultra-low borrowing costs, while its exporters ride a recovery tide that is pushing up demand from the United States and China as well as other European states.

"There are no signs that the dynamic growth of the German economy will stop abruptly," KfW chief economist Joerg Zeuner said in a research note following Wednesday's Federal Labor Office data.

"So we expect new employment records for 2018 and a further tangible increase in real wages."

The seasonally adjusted jobless total dropped by 29,000 to 2.442 million, the data showed - more than double the 12,000 forecast in a Reuters poll.

December's unemployment rate was 5.5 percent, the same as a revised reading for November and the lowest level since German reunification in 1990, the office said. In 2017 as a whole, the rate fell to 5.7 percent from 6.1 percent.

GETTING LEFT BEHIND

The strong labor market provides welcome relief for conservative Chancellor Angela Merkel as she struggles to form a coalition government more than three months after a national election.

Data released on Tuesday showed Germany's workforce expanded last year to a record 44.3 million, and the Ifo economic institute expects the rosy picture to endure, with employment levels hitting 44.8 million this year and 45.2 million next.

The Labor Office said there were 761,000 job vacancies in December, suggesting companies are struggling to find skilled workers quickly.

But that offers scant comfort for those whom the economic upswing is leaving behind.

The number of Germany's long-term unemployed has remained broadly unchanged over the past ten years at around 1 million.

The German economy is expected to have grown by a calendar-adjusted 2.6 percent in 2017 and it is seen expanding by 2.5 percent in 2018, according to the Bundesbank.

The Federal Statistics Office will publish preliminary gross domestic product growth figures next week.

For a table of the labor market figures, click on:

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monetary / fiscal policy / policy makers

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German jobs bonanza pushes unemployment to record low

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BERLIN (Reuters) - Germany's unemployment rate hit a record low as its jobless total fell more than forecast in December, underpinning a broad-based economic upswing that augurs well for further strong growth in 2018.

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https://www.bloomberg.com/news/articles/2018-05-14/germany-set-for-slowdown
https://www.thelocal.de/20180515/german-gdp-growth-disappoints-in-first-quarter

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GDP

Inflation

Unemployment
https://www.ft.com/content/aac75c32-0664-11e8-9650-9c0ad2d7c5b5
http://www.dw.com/en/germanys-jobless-rate-hits-fresh-record-low-as-economy-booms/a-43180134
https://www.thelocal.de/20180228/unemployment-in-germany-stays-steady-at-historic-low