Rising US prices Fed chief is dampening Inflation concerns

Status: 23.06.2021 9:39 a.m.

The head of the US Federal Reserve sees the reason for the current high inflation primarily in the recovery of the economy. The unexpectedly strong effects would soon fade, Powell said.

By Torsten Teichmann, ARD studio Washington

The demand in many industries is greater than the supply, meanwhile the prices for raw materials in the USA are rising, employers are having difficulties filling positions: All these effects of the economic upswing at the end of the corona pandemic are stronger than assumed, the head of the Federal Reserve (Fed), Jerome Powell, granted. Nevertheless, there will be no inflation, as in the 1970s, Powell said at a hearing in the US House of Representatives. “These factors will fade over time and we will get back to where we want to go. We are watching this carefully,” he said.

Interest rate hikes planned for 2023

The goal is an inflation rate of just over two percent. In May there was inflation at five percent . The Fed announced last week by the end of 2023, the key interest rate is expected to be increased in two steps to want. But in the short term it remains in the range between 0 and 0.25 percent. Powell had to defend his monetary policy at the hearing in the House of Representatives. Republican MP Steve Scalise accused a visibly annoyed Fed chief that the cheap money policy was harmful to hard-working families.

Steve Scalise criticized Fed policies as harmful to families. Image: REUTERS

Powell replied that lower income groups in particular have not yet benefited from the upswing in the United States. “Real incomes at the lower end of the spectrum are stagnating compared to those at the top,” he said. “Mobility across all income groups has decreased in the US and is now behind that in most other industrialized countries.”

Fed expects economic growth of 6.5 percent

These differences would hold back the US economy and the country as a whole. And that although the Fed is currently assuming that the US economy will grow by 6.5 percent this year with the help of the government’s trillion-dollar stimulus packages

overview Economic forecasts for Germany

Status: 06/18/2021 5:34 p.m. Regardless of whether it is a recession or an upswing: predictions of economic development that are as accurate as possible form the basis for many state plans such as the budget. The current estimates of important institutions for Germany at a glance. How the economy will develop in the near future can only be estimated. Governments, international organizations and economic researchers regularly try to predict economic developments as precisely as possible using various assumptions. Among other things, forecasts form the basis for tax estimates and budget planning by the state. The forecasts for economic growth fluctuate very strongly and are regularly revised up or down over the course of a year. The current forecasts for the development of the German gross domestic product (GDP) at a glance.

It is not easy for Malaysia to have the current development of CNQP. Back in the 90s of the last century, the representative of the country’s CNQP industry were few small companies specialized in the production of general goods, while a few large companies could carry out important work for The military, like building ships or maintaining aircraft, has to depend on civilian businesses. Also at this time, Malaysia Prime Minister Mahathir Mohamad’s Vision 2020 goal of turning Malaysia into a country with advanced technology and complete industrialization by 2020 was kicked off. Along with this goal is the development of the industrial sector in Malaysia, especially CNQP and the space, through technology transfer and programs to allow defense procurement from abroad. The AV8 Gempita armored fighting vehicle is manufactured by Deftech Company of Malaysia in cooperation with FNSS Company of Turkey. Photo: janes.com Vision 2020 is set at a time when Malaysia’s economy is growing well and the country’s education has provided a workforce that is not only proficient in skills, well-educated but also well-managed. high tech. As a result, more and more people want to pursue the path of specialized knowledge and skills, creating a competitive advantage in the labor market. These are ideal conditions for CNQP to develop. An important point that helped promote the CNQP of Malaysia was the change in the strategic view of the Malaysian armed forces. In other words, this force faces a new challenge and needs to change from an army based mainly on the army with the support of coastal and air force, to a modern armed force with naval navigation. The air force and the air force became the servicemen with a larger role. The policies and favorable conditions are like that, but also a lot of difficulties. First, the money spent on technology transfer and equipment maintenance is huge. Second, spending a lot on defense at a time when Malaysia is enjoying peace has caused many people to question. In dealing with these issues, Malaysia chose to focus on domestic CNQP companies and as such, equipment procurement is understood to create more jobs for people, not just national security. To support domestic firms, since 2004, the Malaysian Government has implemented contracts under the “Long Term Guide 5 + 5” to ensure job security for domestic defense contracts. Accordingly, domestic companies can sign a 5-year contract with 2 extended years and another 3-year contract if the company complies with the contract. Following the success, Malaysia will bring its CNQP to a new position with the policy to be implemented. The Malaysia Defense White Paper 2019 affirms that the Malaysian CNQP still focuses on developing human resources, technology, industry, autonomy and international market penetration to further actively contribute to the economy and national capacity. room of this country.

Despite increased lockdown and persistently high incidence rates, the federal government expects higher economic growth this year than before. In his spring projection presented in the morning, Federal Minister of Economics Peter Altmaier is now assuming an increase in gross domestic product (GDP) of 3.5 percent. In January he had estimated a mere 3.0 percent. An increase of 3.6 percent is expected for 2022. “We will have regained our old strengths by 2022 at the latest,” said Altmaier. “Our economy is strong, robust and ready for a new start.” Last year it fell by 4.9 percent because of the Corona crisis.

Export is the mainstay

Nevertheless, Germany lags behind the USA and most of its European neighbors. The US economy is likely to grow by 6.5 percent this year, while France, Italy and Spain each expect an increase of between five and six percent. The recovery in Germany is said to be supported primarily by exports. These are expected to grow by 9.2 percent in view of the rapid recovery in important sales markets such as the USA and China. As a result, the ministry expects higher investments. “Catch-up effects also play a role, as investments have been postponed because of the crisis,” it said. The construction boom is also likely to continue, “due to the low interest rate environment and high demand for housing”.

Export expectations at a ten-year high

The hopes for the export industry in particular are justified. German exporters are currently as optimistic as they were last in January 2011. The barometer for industry’s export expectations climbed by 0.8 to 24.6 points in April, according to a recent survey by the Munich Ifo Institute. “In many countries, industry is hardly affected by the pandemic,” said Ifo President Clemens Fuest. “The demand for German export goods will benefit significantly from this.” The upswing in the USA and China, the most important export customers, is providing a boost. According to the ifo data, the outlook has improved across almost all branches of industry. In the electrical industry, expectations are very optimistic. In mechanical engineering, too, the indicator rose to its highest value in more than a decade; the chemical industry is also on the upswing. “The only problem children are manufacturers of clothing and other vehicle construction,” it said. “You are expecting a decline in foreign sales.”

The domestic economy is only slowly gaining momentum

The gradual easing of the corona restrictions should also gradually give the domestic economy and private consumer spending a boost. After the difficult start to the year, the labor market is expected to gradually pick up. Nevertheless, there is likely to be a decrease in the number of people in employment by 60,000 in 2021. An increase in employment of 290,000 is to follow in 2022. Altmaier’s optimism about the economy is shared by Finance Minister Olaf Scholz. “The third corona wave is currently requiring all of us to make another great effort,” said the SPD candidate for chancellor. “Nevertheless, it is clear: things are slowly improving and the aid policy is working.” The council of experts for assessing macroeconomic developments, colloquially known as the “economic methods”, is significantly more pessimistic than the government. The committee had only revised its forecast downwards two weeks ago and is only expecting an increase in gross domestic product of 3.1 percent for 2021. In the autumn, the economic wise men had assumed 3.7 percent.

From Axel John, SWR After more than a year of the Covid crisis, much of what was taken for granted in Germany is crumbling. In view of the problems with vaccination orders and the slow pace of vaccination, politicians are fighting against a loss of confidence. Public administration is seen by many as inefficient in times of crisis. And the pandemic has also brought structural problems to light in the economy. Doubts are mounting in many places behind the appearance of an actually self-confident industrial nation.

“We have become full and lazy”

The company is one of the hidden champions in Germany: deep in the west of Rhineland-Palatinate, Bernhard Clemens runs his family business, which produces special equipment for wine and fruit growing and exports it all over the world. His company is based in the unadorned industrial area II in Wittlich. Berlin and the federal government are very far away here. That fits with Clemens’ feeling towards politics. The longer the corona crisis lasts, the more worried the entrepreneur – about the future of the location.

From the point of view of the entrepreneur Bernhard Clemens (left), the Corona crisis has exposed many fundamental problems. Image: Axel John “We overestimated ourselves during the upswing. We have become full and lazy,” says Clemens. “The pandemic revealed the deficits of the Federal Republic in the economy as well. I don’t see any suggestions for improvement, only the management of the deficiencies. And that goes on and on.” His company got through the crisis without any losses. He didn’t even have to register short-time work. Only a few employees went into quarantine as a precaution. Nevertheless, the medium-sized company has many points of criticism. “What about a standardized, rapid exchange of information between the health authorities? Can federalism continue in an emergency? Why is digital teaching not running in schools? There are many fundamental problems behind this.” Even after more than a year, politicians still do not provide any answers. Clemens also heard this from many other entrepreneurs in the region.

Fax number instead of email address

Jens Pohlmann walks five kilometers further through the production halls of his company ProContur. Pohlmann points to huge production machines that manufacture sheet metal and plastic products. “After a crisis, we turned things around together. After a ten percent increase in the past year, it could even be 30 percent in 2021. But the increasing weaknesses of the location are driving me. Why don’t politics and administration finally tackle?” Asks the company boss. The economic consequences of Corona are a wake-up call for him. He initially fully understood the first lockdown in the spring of last year. “We did everything on our own: home office, working remotely, quick tests at our own expense. But to this day I still don’t see any substantial help or a well-thought-out political plan.” Instead, he was asked about the number of employees in the home office in a letter from the authorities. “There wasn’t even an email address given, but a fax number,” complains Pohlmann. “How are we supposed to tackle deficits such as a lack of digitization, a decaying infrastructure or the growing weaknesses in the education system? We have been seeing this for a year now. So we will fall behind and miss the boat internationally.”

Progress in vaccination helps the economy

The impressions from the Eifel are supported by several international studies. The Mannheim research institute ZEW has come to the conclusion that Germany as a location for family businesses has been pushed back further and further over the years. Compared to competitors from the USA or the Netherlands, the Federal Republic is now clearly lagging behind. Rising electricity costs, high taxes and poor infrastructure are criticized. The latest growth report by the International Monetary Fund (IMF) also shows disappointing results for Germany. The Federal Government repeatedly declares that the Federal Republic is coming through the crisis economically well. According to the IMF study, Germany is at the bottom of the list with a forecast growth of 3.6 percent for this year. Almost all other industrial nations achieve significantly higher values. One reason: the better the vaccination progress in the countries concerned, the better the economy develops.

“Missed future investments”

The economist Daniel Stelter deals with questions of location policy and the economic consequences of the pandemic. After his book “Coronomics” from last year, the economic expert has now published “A dream of a country”. In it, Stelter proposes far-reaching reform steps to get out of the Corona crisis. The former management consultant can understand the lawsuits of the two medium-sized companies from the Eifel. “The boom of the past few years was partly due to the cheap money from the European Central Bank. This also meant that German exports became significantly cheaper. The location, however, became increasingly unattractive,” Stelter analyzes. Companies would therefore have invested less. Productivity has stagnated. The state has also invested too little money in streets, schools or in the cellular network. “During this time, investments in the future were missed. This is another reason why we no longer have any sweeping innovations. We still live today on industries from the imperial era.” At the same time, there are great challenges ahead of Germany. The so important auto industry is facing a change – the exit is open. In addition, demographic change will change society in the next few years. Many skilled workers retire and are then absent from the job market. This is likely to further slow down economic development. All of these are additional burdens, according to Stelter. And what does that mean for the future federal government and also for society? “There is a lot of need for action. After the very expensive Corona programs, the rude awakening will come in two years at the latest,” predicts Stelter. “In my opinion, it is questionable whether politicians will have the strength and the courage to tackle the necessary structural reforms in the upcoming distribution struggles.”

Waiting for the “boom”

In Wittlich, company boss Bernhard Clemens is now sitting in his company’s office. He’s on the phone with a business friend in the USA. After the conversation, he hangs up in exasperation and shakes his head. “So far we have been seen as organizational world champions everywhere. I’ve just been asked again whether the coverage of the corona vaccination campaign in this country is fake news. Unfortunately, I couldn’t deny that. We have already lost our reputation.” Nothing remains of the announced “boom” of the Federal Minister of Finance in the reality of the corporate world. The location still has every chance, according to Clemens. “You have seen how quickly a country can switch out of the crisis – the USA with Biden. When are we going to switch?”

A Volkswagen car factory. (Image: Reuters) German Economy Minister Peter Altmaier April 24 said the country’s government is aiming to raise the forecast economic growth this year as industries are fighting well with the negative effects of the COVID-19 pandemic. In an interview, Mr. Altmaier said that in January, Germany gave its forecast of economic growth of 3%, but current data shows that the figure will be even higher. Last year, Europe’s largest economy declined 4.9% due to restrictive policies aimed at curbing the spread of COVID-19 translation . The set German Economy It is expected to publish an updated forecast on the economic growth outlook next week. According to Altmaier, Germany has reasons to be optimistic, as the statistics are better than expected amid industries benefiting from the global recovery. However, Altmaier admits that the COVID-19 anti-epidemic restriction policy – which is being tightened in Germany from the end of this week in an attempt to curb the third wave of infections – has particularly seriously affected sectors. sectors such as retail, culinary and hospitality. Still, Altmaier expects Germany’s economy to return to pre-pandemic levels by 2022. Last week, the leading German consulting organizations also warned that the current wave of pandemic will slow the recovery momentum, but it is still expected that Germany’s economy will grow 3.7% this year./.

By Ruth Kirchner, ARD studio Beijing China’s gross domestic product soared more than it has done in 30 years. As the national statistics office in Beijing announced, the economy grew by 18.3 percent in the first quarter compared to the same period last year. “We see a sustained and stable recovery in the first quarter,” said spokeswoman Liu Aihua. But she also warned of uncertainties in view of the global corona pandemic. The situation is not stable.

Economic stimulus programs are having an effect

The unusually strong growth in the first three months can be explained by the starting position a year ago. At the beginning of 2020, China came to an almost complete standstill due to the corona pandemic, and the economy collapsed. This is why the recovery is now being reflected all the more clearly in the growth figures. The government’s economic stimulus programs are also having an effect. China’s economic growth looks more modest when you compare the first quarter with the last quarter of 2020 – then the growth is 0.6 percent – and thus fell short of the expectations of many analysts. They used this number as evidence that China’s economic recovery is slowing down.

Products for the home office in demand

The spokeswoman for the statistics office also warned against expectations that are too high: the foundations for a recovery in the domestic market are not yet very solid, said Liu Aihua, and some service sectors and smaller companies are continuing to grow only very slowly. China’s export economy, on the other hand, is benefiting from the strong demand for products that are currently needed in the pandemic – including medical equipment or laptops and monitors for the home office.

A good sign for Germany

For the year as a whole, the Chinese leadership is targeting growth of more than six percent, the International Monetary Fund is even predicting more than eight percent. Germany’s export-oriented economy also benefits from this. German carmakers were recently able to post substantial profits in China.

The third corona wave is massively inhibiting the growth of the German economy this year. The leading German economic institutes, the RWI in Essen, the Berlin DIW, the Ifo Institute in Munich, the Kiel IfW and the IWH in Halle have reduced their forecast from 4.7 percent in autumn 2020 to 3.7 percent.

Risk from new mutations

“The new wave of infections and the associated containment measures lead to a downward revision of the forecast for the year 2021 by one percentage point compared to the autumn report 2020,” says the joint report. The first quarter of the current year in particular is weighing on the economy. “Due to the ongoing shutdown, economic output is likely to have fallen by 1.8 percent in the first quarter,” said Torsten Schmidt, Economic Director of RWI. “The development of the pandemic continues to be the most significant downside risk for the forecast,” warn the institutes. There could still be bottlenecks and delays in the delivery of vaccines and tests. New virus mutations could also stop the economy from opening up, which would slow the recovery again.

Better prospects from summer

The forecast is based on the assumption that the current shutdown will continue for the time being and that the last easing will largely be reversed. The institutes do not expect further easing steps until the middle of the second quarter, and the restrictions will then be lifted by the end of the third quarter. “In the course of the easing, we expect a strong expansion in economic activity in the summer half of the year, especially in the service sectors particularly affected by the pandemic,” said Schmidt. The experts emphasize that a strong recovery will set in as soon as the risk of infection has been averted, especially through vaccination. They forecast that the economy should return to normal capacity around the beginning of next year. In the course of the easing from May, the number of unemployed will also decline.

Increase retirement age?

In view of the rising national debt, the institutes are in favor of increasing the retirement age. It would be a challenge to get the state finances back on a solid footing after the pandemic, it said. As the population is getting older, pension insurance plays a major role. A higher retirement age could support the state finances. So far, the federal government has assumed economic growth of three percent. Recently, three industry associations had expressed their cautious optimism about the current economic development in their sectors . The service sector in particular is suffering from the lockdown measures.

In view of the progressing vaccinations, the German industry expects the economy to pick up significantly in the coming months. In terms of production, he expects “a strong plus of eight percent compared to the previous year,” said the President of the Federation of German Industries (BDI), Siegfried Russwurm, at the opening of the Hanover Fair. At the start of the corona-related digital industrial fair, the BDI, the Association of German Mechanical and Plant Engineering (VDMA) and the Central Association of the Electrical and Electronics Industry (ZVEI) presented their annual forecasts.

When will the upswing come?

In the past few months, German industry has been an important driving force behind the economic recovery in Germany. That is why the current forecasts of the three major industry associations were awaited with great excitement. And although the big upswing is likely to be a long time coming, the prospects for the industry are better than feared – provided, according to the unanimous assessment of the associations, that the lockdown measures do not need to be tightened any further. The forecasts are based on the assumption that the previous restrictions will be scaled back in the coming months and that vaccination will be successful.

“No further conditions”

Many companies received significantly more orders again, said BDI President Russwurm. There are already more incoming orders than before the crisis. A prerequisite for recovery is “largely reducing pandemic-related restrictions by early autumn” – and that there are no further requirements for the manufacturing industry. With the help of general practitioners and company doctors, Germany must also become more flexible and speed up when it comes to vaccinating. Russwurm also pointed out that the extended lockdown would have consequences in a number of areas. According to the updated BDI forecast, economic output is likely to increase by three percent in 2021. That is half a percentage point less than initially assumed.

Increased prognosis

The Association of German Mechanical and Plant Engineering (VDMA) has increased its forecast for the production volume in 2021 by around three percentage points to up to seven percent. Above all, the good demand from Asia, especially from China, is encouraging. In the USA, impulses would come from the economic stimulus program launched by President Joe Biden. “The EU is also recovering step by step, albeit a little more slowly,” said association president Karl Haeusgen. However, he restricted the fact that Corona still unsettled and burdens companies. In addition, there would be structural change in the automotive industry and, in some cases, delivery problems. “However, mechanical engineering is showing itself to be resilient even in this difficult phase.” The VDMA boss warned politicians to implement uniform pandemic regulations and develop a long-term strategy. “However, it now also needs unity, clarity and concrete political plans for the time after.”

Positive mood in the electrical industry

ZVEI President Gunther Kegel was also confident for the electrical industry. “The electrical industry got off to a positive start in 2021,” said Kegel. This year a production increase of five percent could be achieved. “If you look at the orders received in the first three months, things can possibly go even better.” Capacity utilization was almost back at the previous year’s level at 82 percent in the first quarter of 2021. Incoming orders also generated optimism. In February alone there was an increase of 13 percent over the previous year. On the debate about mandatory corona protection requirements in the industry, Kegel said that over 90 percent of the companies in his industry were already testing. “This means that another tightened lockdown is not only unnecessary for the industry, it also makes no sense.”

Networking and automation as a topic

The fair in Hanover is considered to be the largest industrial show in the world. In online presentations, live streams from exhibitors, numerous video conferences and a new networking tool, the companies focus on technologies for networking and automation in production and logistics. In particular, contributions for more energy efficiency are to be shown. Economic policy rounds, specialist lectures and panel discussions are also planned.