DAX

DAX

19 October 2017Reading time: 3 minutes

Companies that are listed on the DAX benefit from the growing world economy. In October the International Monetary Funds (IMF) announced in their half-yearly World Economic Outlook that the worldwide economic growth will reach 3.6% this year and 3.7% in 2018, which is somewhat higher than the IMF predicted in July. This would be the strongest worldwide economic growth since 2011. However, the IMF warns that this economic recovery could be temporary and therefore it is necessary to carry out structural reforms to also realize economic growth in the medium term.

The DAX also benefits from the market relieve after the German election results. At the end of September, Angela Merkel won the elections with her political party CDU/CSU and she will commence her fourth term of office as chancellor. The political party reached 33% of the votes, which however was a loss of 8.5 percentage point compared to the previous elections in 2013.

The populist-right party Alternative für Deutschland (AFD) reached 12.6% of the votes and has become the third largest party of Germany. Merkel however does not want to form a government with the AfD. Her current coalition partner SPD, which reached 20,5% of the votes, has stated to take place in the opposition and therefore the chancellor probably will form a coalition with the FDP and the Grünen. For now it is unknown if and if so when Merkel will realize a new coalition.

Meanwhile the German economy continues to grow at a steady pace. According to the German ministry of Economic affairs, the industrial production increased with 2.6% during August on a monthly basis. This would be the largest growth over the past six years. On an annual basis the growth was 4.7%, which is the largest increase since January 2014. Partly because of that the ministry decided early October to raise the growth expectations for the domestic economy. Where the growth expectations for 2017 where 1.6%, this is now been adjusted to 1.9%. According to the ministry this is due to a higher consumer spending as well to company investments. The ministry expects that the German inflation comes at 1.8% in 2017 and 1.6% in 2018.

However, there are also some concerns about the German economy. The German economist Marcel Fratzscher for example claimed earlier this year in “Die Welt” that Germany may already be over its economic peak. In a recent interview with “Het Financieele Dagblad” Fratzscher also claimed that the gap between poor and rich in Germany has become larger. He is especially concerned about the next fifteen years. According to the economist Germany should invest less in industry and industrial production and more in communication, information and technology. It remains to be seen which plans the new government will present.



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18/10/2019 16:04:50