Germany’s GDP growth outlook hit by euro crisis, US-EU trade conflict

Ifo said the economic upswing in Germany should continue but at a slower pace, echoing an assessment by the Bundesbank last week. (Reuters)
Updated 19 June 2018
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Germany’s GDP growth outlook hit by euro crisis, US-EU trade conflict

ERLIN: Germany’s Ifo institute on Tuesday cut its forecasts for growth in Europe’s biggest economy this year and next, citing a weak start to the year and increased global risks.
Ifo said it expected the German economy to grow by 1.8 percent this year and in 2019, a big revision downwards from previous forecasts of 2.6 percent and 2.1 percent respectively.
“The economy developed significantly more weakly than anticipated in the first few months of the year,” Ifo economist Timo Wollmershaeuser said. “The global economic risks have risen significantly,” he added.
Ifo said the economic upswing in Germany should continue but at a slower pace, echoing an assessment by the Bundesbank last week.
In addition to weak industrial activity and exports in the first four months of the year, a trade dispute between the United States and the European Union is clouding the outlook for the German economy. US President Donald Trump is threatening to impose hefty tariffs on car imports from European allies in addition to unilateral metals duties.
The Bundesbank said on Monday that German growth should rebound in the second quarter thanks to higher state spending, a humming construction sector and strong private consumption.
But it warned that trade and political concerns have made the outlook for the economy more uncertain and revised down its own growth projections.
A new Italian coalition government that comprises anti-establishment parties with a brief to shake up EU institutions has also unnerved German companies.
“The downside risks for the German economy have significantly risen,” said Ifo’s Wollmershaeuser. “Germany’s economic advantages are far outweighed by two risks — euro crisis 2.0 through Italy and a trade war.”
As well as the US-EU trade dispute, German business leaders are worried that a trade confrontation between the United States and China could harm exporters that rely on the world’s two largest economies for growth.
China has raised tariffs on $50 billion in US goods, responding to similar measures by Trump, who has also threatened a 10-percent tariff on $200 billion of Chinese goods.
“The likelihood that we have a trade war that also affects Germany is higher now than it was in spring,” said Wollmershaeuser.


Singapore Airlines finds premium economy a tougher sell on new non-stop US flights

Updated 20 min 34 sec ago
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Singapore Airlines finds premium economy a tougher sell on new non-stop US flights

  • The carrier last month resumed after five years the world’s longest commercial flight
  • It represents a major expansion in the US market for Singapore Airlines

SINGAPORE: Singapore Airlines is facing no problem selling business-class tickets on its ultra-long non-stop flights to the United States but is having to price premium economy seats very attractively, a senior executive said on Wednesday.
The carrier last month resumed after five years the world’s longest commercial flight, an almost 19-hour non-stop journey from Singapore to New York.
The airline ordered seven new ultra-long-range twin-engine Airbus SE A350-900ULRs fitted with just 67 business class and 94 premium economy seats for those flights and for non-stop services to Los Angeles and San Francisco. These flights have no economy class seats.
It represents a major expansion in the US market for Singapore Airlines and a test of whether the carrier can charge the 20 percent price premium that travel industry data shows is typical for ultra-long non-stop services due to their popularity with time-sensitive business travelers.
Singapore Airlines Executive Vice President Commercial Mak Swee Wah said there was existing demand for business class which he expected would continue to pick up.
For premium economy, however, he said some markets were not “entirely familiar” with the product, which offers more leg room and other amenities than economy class.
“I think we need to continue to stimulate and encourage the market to consider this product, initially with very attractive pricing, but eventually I think people will see that even at prices which we offer it is a good product to purchase because it is a very long flight,” he said at an analyst and media briefing.
His comments came after Singapore Airlines reported on Tuesday an 81 percent plunge in second-quarter net profit, hurt by higher fuel prices, lower airfares and non-cash losses at its part-owned Virgin Australia Holdings Ltd.
Yields, a proxy for ticket prices, fell 2.2 percent in the second quarter compared with a year earlier, failing to help offset the impact of a 24 percent rise in fuel prices.
Singapore Airlines is offering premium economy fares as low as S$1,698 ($1,230.17) return from Singapore to New York for weekday travel over part of the peak Christmas travel period, according to its website.
That is in line with economy class fares from premium rivals like Hong Kong’s Cathay Pacific Airways Ltd. and Dubai-based Emirates that require a stop and a longer travel time, according to a Reuters search on Expedia.
When it previously flew to New York and Los Angeles non-stop on four-engined A340-500 jets that used more fuel, it had initially offered both “executive economy” and business class but later switched to all business class. Those flights were abandoned in 2013 when high fuel prices made them uneconomic.
A Singapore Airlines spokesman said on Thursday that the airline constantly reviewed its cabin configurations.
“However, at this point we are confident we have the right balance with business class and premium economy class seating on our A350-900ULRs, and there are no plans to change it,” he said.