(December 2012) Over the past 30 years, there has been a trend of a falling labour share in national income in several countries while corporate savings rise. In the mid-1970s, a majority of global investment was funded by household saving but in recent years global investment is funded primarily from corporate saving. Cash held by big US and European public companies today amounts to trillions of dollars. We reported in 2011 that US worker pay has fallen to a 50-year low as a ratio of company sales and US GDP (gross domestic product) according to JP Morgan Chase, one of America's biggest financial firms. Profit margins were at their highest level in 2010 since the mid-1960s, according to Michael Cembalest, the chief investment officer of JP Morgan Chase. Cembalest examined the rise in profit margins “from peak to peak” -- from their high point in 2000, just before the dot-com bust, to their high point in 2007, before the financial crisis. In that period, profit margins rose from just under 11% of the S&P 500’s revenue to just over 12% and rose further to 13% in 2010. In January 1914, Irish-American Henry Ford startled the world by announcing that Ford Motor Company would pay $5 a day to its workers. It more than doubled the average autoworker's wage and having introduced the moving assembly line in 1913, Ford had reasoned that since it was now possible to build inexpensive cars in volume, more of them could be sold if employees could afford to buy them.
(November 2012) Euro Debt Crisis: Two reports published this week claim some glimmers of light amidst the gloom in peripheral economies. One report says "fiscal results drive home one fundamental point: austerity is a potent medicine. It has to be applied in the right dose. A lack of the necessary medicine can kill a patient. But so can an overdose." Meanwhile, in September 2012, according to Eurostat, the EU's statistics office, there were 5.5m young persons (under 25) unemployed in the EU27, of whom 3.49m were in the Eurozone. Compared with September 2011, youth unemployment rose by 164,000 in the EU27 and by 275,000 in the Eurozone. In September 2012, the youth unemployment rate was 22.8% in the EU27 and 23.3% in the Eurozone, compared with 21.7% and 21.0% respectively in September 2011. In September 2012 the lowest rates were observed in Germany (8.0%), the Netherlands (9.7%) and Austria (9.9%), and the highest in Greece (55.6% in July 2012) and Spain (54.2%). However, while the situation in both Greece and Spain is very bad, the statistics makes the reality look even worse. Spain's more realistic rate is in the low 20s and Greece's is about 15%.
(November 2012) On Wednesday Finfacts reported that German companies are expected to export goods and services worth more than €1tn in 2012. While imports will also hit a new high in 2012, the German trade surplus is forecast to hit €174bn - - a 10% increase. Our report also touched on trade with Asia where China is the only country from the region among the Germany's top 10 trading partners. Here we look at the regional and sectoral concentration of German exports.
(November 2012) Germany's new orders from Eurozone countries have fallen by 20% compared to the 2007 average. While the share of Germany's exports to the region has declined from 43.8% to little more than 35% during the same period, markets in emerging economies and the US have helped to offset the drop . However, both the Eurozone and the rest of the EU27 remain not only important for German exports but 65% of Germany’s foreign investments are in the EU. Only about 53% of the European Stoxx 600 companies reporting to date have managed to beat consensus EPS (earnings per share) expectations. Therefore, European weakness is increasingly being transmitted to Germany via the profit channel, too. Therefore the German economy is at a standstill in Winter 2012.
(November 2012) German authorities have launched nationwide raids on suspected tax evaders in connection with a probe into several hundred Germany-based clients of Switzerland’s biggest bank, UBS. The raids were ordered by state prosecutors in Bochum, North Rhine-Westphalia.
France needs "competitiveness shock"; Hollande promises "strong decisions" but unlikely until at least 2017
(November 2012) On Monday, both a report commissioned by the French government and the report of a regular audit by the International Monetary Fund (IMF), separately called on France to implement major economic reforms. Louis Gallois, former head of European Aeronautic Defence & Space Co. (EADS -- parent of Airbus) called for a €30bn cut in social security payroll taxes - - which would be mostly paid for by tax increases on consumption -- to boost the global strength of French companies that trail Germany's powerful exporters. He called for a "competitiveness shock" while the IMF said the "the ability of the French economy to rebound is...undermined by a competitiveness problem." At a Europe-Asia summit in Vientiane, Laos, François Hollande, French president, said France will take "strong decisions" to boost competitiveness at home. Last week the Financial Times said that the French comparison often made is with reforms enacted in Germany by Gerhard Schröder. "But asked recently whether he would follow the same course, Mr Hollande pointed out that the former Social Democratic chancellor undertook his reform programme only after he had won re-election." That would see Hollande having his fingers crossed until 2017.
(November 2012) Not even one in seven people in Germany was younger than 15 years in 2010. Among all European countries, that was the smallest proportion of under 15 year olds in the total population. The number of children under the age of 18 in Germany fell to 13.1m in 2010, down 14% from 2000.
(October 2012) Germans are getting richer despite the Eurozone debt crisis, as the country benefits from a strong economy that has slowed only in recent months. Low interest rates have also helped. Private debt levels have risen only slowly.
(October 2012) German Industry: With a slowdown in emerging economies led by China coupled with a recession in the Eurozone, only a moderate recovery is the best that can be expected in 2013.
(October 2012) German investor sentiment rose for a second straight month in October, with the perceived risks facing the economy reducing in recent weeks, a key survey revealed Tuesday. Today, Destatis, the federal statistics office, reported that 15.8% of the population in Germany - - that is some 12.8m people - - were at risk of poverty in 2010. The rate remained on a level comparable with 2009 (15.6%) and 2008 (15.5%). This central result of the 2011 EU-SILC Survey comprised 13,512 households and 24,220 persons from the age of 16 were asked about their income and living conditions.