Eurozone and the US are out of sync
The economies of the Euro area and the US often move in tandem due to their similar structures and deep economic connections. However, divergences occur, notably during asymmetric shocks like the Euro crisis of 2011-2013.
Harakiri in Germany
Germany is witnessing an economic downturn, a phenomenon receiving surprisingly scant attention. This mirrors a broader European trend of overlooking the foundations of prosperity in favor of more sensational topics.
Germany’s robust industrial sector, about 20 percent of its GDP, is the linchpin of its economic success.
The chemistry and energy-intensive industries are vital here, consuming 77 percent of the industrial energy and contributing significantly to the GDP.
A shaky foundation for considerable optimism
For the stock market, inflation dynamics remain crucial. These ultimately determine the level of interest rates required to bring inflation under control. The higher the required interest rate, the greater the risk of recession and the smaller the corporate profits. High interest rates are also bad for stock valuation levels. However, some companies have managed to increase their profit margins with high inflation, as we noticed last year.
This is not going well, Europe!
The global economy has experienced several major shocks in recent years. A period of normalisation has now begun. Once the dust settles, we’ll see if there are any differences from the pre-pandemic world. To discover these, we must seek out striking and deviating patterns.
When the international freight traffic was disrupted during the pandemic, economists began paying closer attention to overseas container transport. Over the last two years, a development has emerged that you could rightly call worrying for Europe.
The recession that just won't come
It is striking how bad economists are at predicting a recession. They have shouted so many times now that a recession is coming, that they have just dug in and knowingly stuck to this tunnel vision.
Enough to drive you crazy
In an earlier column here I defended Liz Truss. I expressed support not so much for the content of her policies as for their intention. Truss wanted to promote the growth capacity of the UK economy and ensure that working would pay more. My support for Truss went completely against the consensus as virtually everyone I heard about her was scathing.