HSBC have forecast mixed news for the German economy this year with benefits expected from global growth, but the lack of demand from the Eurozone may drag back progress.
Following HSBC’s study from their Global Purchasing Manager’s Index (PMI), Germany is thought to be receiving a boost from an upturn in Chinese growth, that should have a positive effect on their stocks that were upgraded to being ‘overweight’, where the performance of securities are expected to perform better than its market or sector.
This is part of a growing trend where the equities market is now proving more popular in the Europe and the emerging markets, although this is not a switch entirely from retail investors into preferring equities over bond purchasing, and Europe has still generally been out of favour with retail investors for the last six years HSBC say.
Since the end of November HSBC found that equity inflows into Europe were higher than the United States by 0.2%, but Europe was dwarfed by the interest in Japan and in particular the emerging markets that attracted 3.5% more investment.
There has also been an increase in international funds buying into several sectors across Europe where consumer durables, industrials, IT, materials and finance were all calculated as being ‘overweight’.
HSBC’s macro economic survey for the first quarter of this year predicted that Germany’s economy would contract at the end of last year, as it did by 0.5% , after three quarters of positive growth.
The survey blames the recession plagued Eurozone for the sharp downfall, due to the “lack of visibility regarding the euro crisis forced companies to become increasingly cautious.”
Export expectations have also increased more sharply than since 2009, but this is anticipated to be offset by growing domestic demand driven by fixed business investment and consumption increasing that should mean a drag on export growth.
Imports for 2013 are expected to grow by 1.6% for the rest of this year, while exports fall by 1.5% nearly levelling out trade numbers.
Despite the recent rise in unemployment, now at 6.7% up from 6.5% at September last year according to Deutche Bundesbank, consumer confidence has held up throughout last year the HSBC survey believes, although during 2013 unemployment is forecast to increase to 7%.
Consumer spending in Germany is forecast to rise by 0.4% this year as average earnings increase by 0.6 %, for industry a 2.1% rise in investment is predicted, with the construction industry especially to be a beneficiary of economic conditions being expected to grow by 1.6%. The monthly IFO business climate survey for German industry , based on 7000 respondents from four sectors of the economy, revealed some good news for the German business community with a rise in confidence for the third month running with the ratings rising to 104.2 from 102.4.
Business expectations were also more positive reaching 100.5 from 98.00 for last month and 95.3 for November, and business situation also improved slightly moving up from 107.1 to 108. Manufacturing increased significantly from a negative score of 2.9 last month to a positive 2.6, with the construction industry also strongly believing better times will arrive, even though it still scored negatively at 0.3, this was down from minus 6.7 in December, and in line with HSBC’s forecast of a successful year.
Retailing improved only slightly with a 0.1 improvement in ratings, but there was not so good news for wholesalers which dropped in confidence to minus 1.5 from a positive 3.4 last month. After the release of the survey on January 25, the DAX responded positively reaching 7857.97, a higher point than from all of last year.