1.6 The business climate is clouding over

1.6 The business climate is clouding over

The state of the global economy is also currently clouding over.  China's growth rates are falling and the country has high private and public sector debts. The trade dispute with the USA has not yet been resolved. The USA wishes possibly to use trade sanctions to combat Germany's large export surplus. With the political crisis in Italy, the continuing problems of many banks, the protests of the yellow vests against the French President Emmanuel Macron and, of course, the crucial issue of Brexit, the expected withdrawal of Great Britain from the European Union, Europe needs to survive a plethora of political and economic problems.

Chart 6: ifo Business Climate Index, January 2019

The supposedly strong Germany is also facing difficult times: In addition to trade problems with Great Britain, which is one of the most important production and sales locations for the automotive industry, the automotive industry is also facing the threat of major problems of a more political nature with an endless flurry of new regulations, especially in the diesel sector. The chemical industry, which is still important, expects sales to fall by 2.5% in 2019. The overall situation is causing unrest, especially among companies. The purchasing manager indices are falling almost everywhere. The ifo Munich purchasing managers' index for Germany is in free-fall at the beginning of 2019.

Chart 7: Purchasing managers' index, March 2019

The purchasing managers' index of the British agency IHS Markit for the eurozone is also clearly seeing a downward trend at the beginning of 2019. As can be seen from the chart, the index is a good indicator of real growth in the euro zone. The country-specific indices for France and Italy are currently performing worse than the German index. According to the IHS Markit survey, only in Spain is the mood currently relatively positive.

The European Commission too has already revised its growth forecasts significantly downwards. In its winter forecast from 7th February 2019, the Commission estimated growth for the EU at 1.3%, a fall of 0.6% as compared to the autumn forecast. The government budget forecasts have also been adjusted (see Chart 9). The figures for Italy and Germany in particular have been revised downwards.

List of references for the used photos and charts: