Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (7979)	6/17/2004 8:12:28 AM
From: Haim R. Branisteanu	Respond to of 116555

Kiel Economic Institute Raises German Growth Forecast (Update1) June 17 (Bloomberg) -- Germany's IfW economic institute raised its forecast for German economic growth this year following faster-than-expected growth in exports. The Kiel-based institute raised its forecast for Europe's largest economy to 1.8 percent from the 1.5 percent it predicted together with the other five leading state-funded institutes in April. Growth will slow to 1.3 percent next year as domestic demand remains too weak to outweigh weaker global growth. ``Exports are the sole reason why we have raised our forecast,'' said IfW Chief Economist Joachim Scheide in a telephone interview. Domestic demand this year ``will show a moderate pick-up, but not as strong as we had forecast in the spring.'' Faster global growth, led by the U.S. and Asia, is supporting Germany's recovery as consumer spending stagnates and unemployment grows. Exports, which account for about a third of the country's gross domestic product, expanded at the fastest pace in more than three years in the first quarter. The VDMA plant and machinery makers' association, whose members include truckmaker MAN AG and forklift maker Linde AG, last week doubled its production forecast for this year. German factory orders gained the most in 15 months in April and growth in manufacturing and services accelerated in May. Other Institutes The Essen-based RWI institute, another of the six state- funded institutes, may raise its growth forecast for 2004 ``toward 1.8 percent'' from the 1.5 percent in the joint forecast in April, RWI economist Roland Doehrn said in an interview this week. A third institute, Berlin-based DIW, said yesterday industrial production will probably rise 1.6 percent this year and 2.5 percent in 2005 after only 0.4 percent last year. ``The global economy is booming -- in Asia, in China, in North America,'' Scheide said. ``The exception is Europe and, within Europe, Germany.'' Consumer demand in Germany has yet to pick up as joblessness continues to rise. In April the jobless total was the second highest among the 12 countries that share the euro. Retail sales in the first four months of the year fell 1.1 percent from the same period a year earlier and new car sales fell 8 percent in May. The DIHK industry and trade association said Monday that German business confidence had failed to improve since February and growth may weaken in the final quarter of 2004. The IfW said it expects export growth to slow to 4.3 percent next year from 8.2 percent this year. `Can't Expect More' The number of people in work in Germany will decline by 110,000 this year as the ``moderate economic expansion'' is insufficient to spur hiring, the institute said. In 2005, employment will increase by 120,000, it said. ``You can't expect more because the fundamental conditions are poor,'' Scheide said. ``Reforms are being slowed and partly reversed. Fiscal policy is restrained by debt, which means the burden for consumers will probably increase. That hurts the outlook for consumption.'' The European Central Bank will resist raising interest rates as the ``moderate'' recovery won't fuel a rise in consumer prices and oil prices are expected to decline, the institute said. ``It is a difficult line to walk for the ECB,'' said Scheide. ``We expect that the ECB will leave its rates unchanged this year and next, but the problem is that inflation is now higher than they had thought earlier this year.'' ECB `Vigilant' The ECB raised its inflation forecast to around 2.1 percent this year, from a December estimate of 1.8 percent. European inflation accelerated to a two-year high of 2.5 percent in May from 2 percent in April. The bank has left interest rates at 2 percent, twice the level of those in the U.S., for a year. ECB President Jean-Claude Trichet Tuesday told Spain's National Radio he will be ``vigilant'' on inflation expectations to ensure they don't lead to higher prices. Germany's six state-funded economic institutes present a report twice a year that forms the basis of the government's own forecasts. Apart from the IfW, the DIW and RWI, they are Munich's Ifo, Halle's IWH institute and the HWWA in Hamburg. To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net. To contact the editor responsible for this story: Catherine Hickley in Berlin chickley@bloomberg.net. Last Updated: June 17, 2004 07:21 EDT