German economy at risk of downturn as growth slows

German economy at risk of downturn as growth slows
Updated 18 December 2014

German economy at risk of downturn as growth slows

German economy at risk of downturn as growth slows

FRANKFURT: German private-sector growth slowed to the weakest in 18 months in December, increasing the risk that a soft phase will turn into a more pronounced economic downturn.
Markit Economics said a Purchasing Managers Index for manufacturing and services fell to 51.4 this month from 51.7 in November. Economists forecast an increase to 52.3. A factory gauge rose to 51.2 from 49.5, crossing the 50 mark that divides expansion from contraction, while a measure for services fell to 51.4 from 52.1.
While German data showed this month that the economy, Europe's largest, had a modest start into the last quarter of the year, the Bundesbank has pointed to signs that growth could strengthen. As the rest of the euro area struggles to expand and inflation hovers close to zero, the European Central Bank has held out the prospect of expanding its range of asset-purchases next year.
The German "data are consistent with only marginal gross- domestic-product growth in the fourth quarter at best," said Oliver Kolodseike, an economist at London-based Markit. "The possibility of a renewed downturn at the start of next year is clearly becoming more and more likely, especially if the survey data continue to disappoint."
The German economy narrowly escaped recession in the third quarter, recording growth of 0.1 percent after shrinking by the same extent in the April-June period. Economists predict growth of 0.2 percent in the final three months of the year.
Companies signaled a second consecutive monthly decline in new business in December, citing a lack of investment and increased competition, according to Tuesday's report.
In France, the manufacturing PMI unexpectedly declined to 47.9 from 48.4. Economists predicted an increase to 48.6. A gauge for services and manufacturing activity in the 18-nation euro area is seen increasing to 51.5 this month from 51.1, according to a separate survey.
A second round of targeted long-term loans to banks by the ECB last week came in at the low end of analysts' forecasts, in a sign that financial institutions see few ways of using cheap central-bank money in the weak economy. ECB President Mario Draghi said on Dec. 4 that "all assets but gold" are under consideration for purchase as the central bank seeks to step up aid to the economy.
The Bundesbank said Monday that some support for German consumers will come from lower oil prices, a development Weidmann has likened to a "mini stimulus package."
Meanwhile, investor sentiment in Germany rose sharply again in December driven by a weak euro and plunging oil prices, a survey found on Tuesday, underlining a sunnier outlook for Europe's top economy.
The widely watched investor confidence index calculated by the ZEW economic institute jumped by 23.4 points in December, after increasing for the first time this year in November, ZEW said in a statement.
It said there was abundant evidence that faith in Germany among financial market experts was being restored.
"This renewed confidence remains linked to the auspicious economic conditions including the weak euro and the low price of oil," ZEW President Clemens Fuest said in a statement.
"This positive trend could be seen in the recent data for German exports. But it should be noted that the current economic optimism is fostered by factors that can change quickly."
For its survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.
The sub-index measuring financial market players' view of the current economic situation in Germany also rose, by 6.7 points.
In November the ZEW headline indicator had bounced back for the first time in 2014, adding to signs that the German economy is stabilizing and providing a boost for the euro zone as a whole.
After hitting a 22-month low in October, the index jumped to 11.5 points from minus 3.6 points the previous month.
Last week Germany reported that its trade surplus had grown slightly in October, with imports showing a sharper decline than exports due in part to the weaker euro.
A frequent criticism of the ZEW index is that it can be volatile and is therefore not particularly reliable.
As a result, analysts were cautious about reading too much into the December data.
"December's sharp rise in German ZEW investor sentiment is an encouraging sign that confidence has so far not been hit by renewed problems in Greece, but the improvement is at odds with the weakness of the more reliable PMI" or purchasing managers' index, said Jennifer McKeown, senior European economist at Capital Economics in London.
The German PMI had declined in December, McKeown noted, and said that she maintained her view "that the Germany recovery will be steady rather than spectacular and that additional policy support is still required in Germany and the euro zone as a whole" to boost growth.
Christian Schulz of Berenberg Bank said "the evidence that Germany's economy is about to reaccelerate after a rough patch is mounting" but warned there may be "new wobbles ahead".
"The market rout triggered by political risks in Greece as well as the economic fallout of sanctions and the sharply lower oil price for Russia are bound to leave traces in German investor confidence in the coming months, if sustained," he said.
Carsten Brzeski, chief economist at ING-Diba bank in Frankfurt, said the ZEW index, with the headline number showing its strongest monthly increase since January 2013, and the weaker PMI sent "mixed signals".
"The economy should benefit from a very special stimulus package: The weaker euro and the sharp drop in energy prices," he said.
"To some extent, however, this very special stimulus package could also be the poisoned apple as it could delay necessary structural reforms."


Low interest rates boosted mortgage demand by 27% through May

Low interest rates boosted mortgage demand by 27% through May
Updated 26 July 2021

Low interest rates boosted mortgage demand by 27% through May

Low interest rates boosted mortgage demand by 27% through May
  • Residential real estate financing contracts offered to individuals by local banks reached 133,006 through May, with a value of SR69.5 billion

RIYADH: Mortgage lending in Saudi Arabia increased 27 percent this year through May, as interest rates decreased to between 1 percent and 4.9 percent, compared to about 6 percent early last year.

Residential real estate financing contracts offered to individuals by local banks reached 133,006 through May, with a value of SR69.5 billion, according to data from the Saudi Central Bank (SAMA).

Real estate financing grew by 50 percent compared with the same period in 2020 when SR46.6 billion was lent via 104,000 contracts.

“There is great competition between banks and real estate finance companies to obtain a greater share of the housing demand, after government support and joint financing programs with the Real Estate Development Fund (REDF), which led to an increase in the volume of lending for home purchases,” Riyadh-based Menassat Reality Co. CEO Khaled Almobid told Arab news.

“I expect more lending during the last quarter of this year despite the difficulties it is facing due to the rise in some housing prices in major cities and the lack of supply,” he said.

Saudi banks are offering mortgages with interest rates as low as 1 percent at Al Rajhi Bank, 2.5 percent at the Saudi National Bank (AlAhli Bank) and up to 4.5 percent at some banks.

Residential villas made up about 80 percent of the total financing, apartments 17 percent, while the purchase of residential lands’ financing made up the remaining 3 percent.

Saudi real estate financing achieved a record growth during the past three years, amounting to about 295,590 contracts, worth SR140.7 billion in 2020, compared to 22,259 financing contracts, worth SR17 billion in 2016, local media reproted citing SAMA data.


Lebanon sells cheapest Big Mac in the world as currency collapses

Lebanon sells cheapest Big Mac in the world as currency collapses
Updated 26 July 2021

Lebanon sells cheapest Big Mac in the world as currency collapses

Lebanon sells cheapest Big Mac in the world as currency collapses
  • Lebanese pound is 70 percent undervalued according to the Big Mac Index
  • A split is emerging between those paid in Lebanese pounds and those in dollars

RIYADH: Lebanon is home to the world’s cheapest Big Mac after the pound slumped in value, leaving it more than 70 percent undervalued against the US dollar, according to the Economist Intelligence Unit.

At 29,904 Lebanese pounds, a Big Mac is not cheap for those being paid in local currency, but with an exchange rate of 17,800 to the dollar, it costs just $1.68 for tourists and those lucky enough to get paid in dollars.

The slump in the Lebanese pound is exacerbating and accelerating inflation on a basic basket of goods, such as rice, sugar and flour, on a daily basis, said Lebanese economic analyst Bassel Al-Khatib.

Most people are paid in the local currency in Lebanon, where the national minimum wage stands at 675,000 Lebanese pounds per month, which was once worth almost $450 at the official exchange rate, but today barely fetches $30 on the black market, according to the Crisis Observatory at the American University of Beirut (AUB).

The Observatory said the cost of food has soared by 700 percent over the past two years, and this increase had picked up pace to 50 percent in the past few weeks alone.

Most Lebanese people are getting poorer on a daily basis, pushing some of them to sell their gold, cars and even furniture to survive, while others wait for US dollar transfers from their relatives abroad, or wait for civil society aid, Al-Khatib told Arab News.

This is all reflected in Lebanese social media, which is flooded with donation requests for new-born baby milk and medications that are not available anymore in the markets or are sold for extremely high prices. There are also numerous donation requests for people in need of food.

At the same time, others are sharing their expensive restaurant bills, such as Babel Baher who spent 5 million Lebanese pounds on a meal and posted the cheque on Facebook.

“$250 is almost nothing for someone coming from abroad,” a Facebook user called Rania wrote under the post. “This is a very cheap bill for someone who has US dollars and this dinner is not expensive at all compared to abroad.”

Al Khatib said that those paid in US dollars are living an affordable life with only $300 out of their salaries while before they needed $3,000 to have the same quality of life.

“The patchwork policies to support some commodities is not helping as all commodities that are subsidized are smuggled, ” said Al Khatib.

The country’s mismanagement with no plan or economic vision to save Lebanon from its worsening crisis, led us here, and there are no positive prospects as long as there are no radical solutions in the country, he said.


PIF-backed Lucid Motors makes trading debut on Nasdaq

PIF-backed Lucid Motors makes trading debut on Nasdaq
Updated 26 July 2021

PIF-backed Lucid Motors makes trading debut on Nasdaq

PIF-backed Lucid Motors makes trading debut on Nasdaq
  • will make itsLucid to make trading debut on New York’s Nasdaq Global Select Market on Monday
  • Lucid merged with special purpose acquisition vehicle Churchill Capital Corp. IV

RIYADH: Lucid Motors, the Californian electric vehicle (EV) carmaker majority-owned by Saudi Arabia’s Public Investment Fund (PIF), will make its trading debut on New York’s Nasdaq Global Select Market on Monday.

Listed under the new ticker symbol “LCID”, the listing came about following the merger of Lucid and Churchill Capital Corp. IV — a special purpose acquisition company — on July 23. The EV firm will begin trading by ringing the Nasdaq opening bell on July 26.

The deal will help Lucid raise $4.4 billion, which will be used to fast track its production growth plans. The firm has over 11,000 paid reservations for its Lucid Air vehicle, which is on scheduled to start deliveries in the second half of this year.

“We are on track to meet our projected deliveries for the next two years, and we look forward to delighting our customers around the world with the best electric vehicles ever created,” Peter Rawlinson, CEO and CTO of Lucid Group, said in a press statement.

Michael S. Klein, chairman and CEO of Churchill Capital Corp. IV, said ahead of the merger: “Lucid has industry-leading technology, clear demand for its products, and is on track to deliver revenue-generating cars to customers in the second half of this year. We are excited to support Lucid’s transition into a public company and confident in its ability to address unmet needs in the automotive industry, which is moving toward electrification at a rapid pace and on a global scale.”

PIF announced its investment in Lucid Motors in Sept. 2018. The Lucid Motors CEO told Arab News in January that his team were scrutinizing possible locations in Saudi Arabia to open retail outlets — what Lucid calls “studios” — for their luxury EVs.

“We are already looking,” he said. “My retail team just returned from a scouting trip in the Kingdom, and that is very much on the road there. Hopefully, we can get a retail outlet there right at the tail end of 2021, probably early 2022.”

Earlier this month, the Wall Street Journal reported that Saudi Arabia stands to record a profit of nearly $20 billion on the back of its investment in Lucid.

PIF will own over 60 percent of the company, which is expected to have a market capitalization of about $36 billion.

Lucid’s expected market capitalization is nearly twice the valuation of Nissan Motor Co. and about two-thirds that of Ford Motor Co., which delivered more than 4 million cars last year. Lucid has yet to sell any cars.

Looking at the market for EVs, a report by the Pew Research Center found that 7 percent of respondents said they currently owned an electric or hybrid vehicle, and 39 percent said they were very or somewhat likely to buy an EV when they next came to purchase.

Interest has grown, with 1.8 million EVs registered in the US in 2020, more than three times as many as four years ago, according to the International Energy Agency.

While the US accounts for 17 percent of the world’s 10.2 million EVs, China is the biggest market, with 44 percent of all cars and Europe following with 31 percent.


Saudi Arabia to introduce insurance on domestic labor contracts in 2022

Saudi Arabia to introduce insurance on domestic labor contracts in 2022
Updated 26 July 2021

Saudi Arabia to introduce insurance on domestic labor contracts in 2022

Saudi Arabia to introduce insurance on domestic labor contracts in 2022
  • Move aims to increase attractiveness of Saudi labor market
  • Recruiters must carry the cost of insuring contracts for first two years

RIYADH: Saudi Ministry of Human Resource and Social Development is expected to start implementing insurance on the domestic labor contract early in 2022 in cooperation with the Saudi Central Bank (SAMA), Al Eqtisadia paper reported.

This decision guarantees the rights and benefits of the employer and the worker, including compensating the employer for the expense of bringing in a replacement domestic worker in the event of death, inability to work, or suffering from chronic or critical diseases, according to the ministry.

The move aims to increase the attractiveness of the Saudi labor market, improve the contractual relationship between workers and employers, and reduce risks in the domestic labor recruitment market, helping to cut costs.

“Recruitment companies and agencies used to provide a 3-month trial period for the worker, compensating families for any potential damage, but once the trial period ends, the two parties are not protected, causing lot of losses to Saudi families,” Saudi development and localization specialist Saleh Al-Anzi told Arab news.

“The insurance contract protects both the worker and the employer,” he said.

The insurance will be technically linked to the mediation contract for the recruitment of domestic workers through the Musaned platform, and the ministry will issue the implementation mechanism later in cooperation with the relevant authorities, including SAMA and the Ministry of Interior, sources familiar with the matter told the paper.

Recruitment companies must carry the cost of insuring the contracts of domestic workers they bring into the country for the first two years, the Saudi Council of Ministers decreed in May.


Saudi car rental facilities to issue e-contracts starting July 25

Saudi car rental facilities to issue e-contracts starting July 25
Updated 26 July 2021

Saudi car rental facilities to issue e-contracts starting July 25

Saudi car rental facilities to issue e-contracts starting July 25
  • Car rental facilities to issue all car rental contracts on the Naql portal

RIYADH: The Saudi Transport General Authority (TGA) started implementing the first phase of the unified electronic contract for car rental starting July 25, TGA announced on its Twitter account.
The unified electronic contract obliges car rental facilities to issue all car rental contracts on the Naql portal through the rental contracts service.
This service will enable the licensed establishments to issue a unified contract with complete statutory requirements and clauses, and will contribute to preserving the rights of the lessor and the lessee, enhancing the confidence in the services provided, and raising the level of quality of services, TGA said.
The unified electronic car contract will reduce disputes and the burden on the relevant authorities and will stimulate investment in the sector, according to the TGA.
TGA launched its Distinguished Transport Partner program in May to strengthen public-private partnerships in the sector.