German economy breaking records (again)

[Thanas]

So much for bullshit like postindustrial service economies.

I don't have time to trawl through national statistics offices for figures, so sorry for using wikipedia. However, that has the German service sector as 70% of the economy and the UK service sector as 73%. That's not actually all that much of a difference.

However, the service sector is to my knowledge much more dialed to the industry than the one in the UK, as well as German manufacturing actually making stuff that people want. Britain's manufacturing however has been in decline since the last decades.

[His Divine Shadow]

I was going to say that yes, much of the service economy depends on the industrial part so saying it's a 70/30 relationship is a bit misleading.

[Teebs]

However, the service sector is to my knowledge much more dialed to the industry than the one in the UK, as well as German manufacturing actually making stuff that people want. Britain's manufacturing however has been in decline since the last decades.

The German service sector being more integrated with industry sounds entirely plausible to me.

However, I'm not sure you can say that UK industry makes things nobody wants. As far as I know it's not getting big government subsidies or anything, so that suggests that someone does indeed want to buy the things. Also, I'm not convinced the UK's manufacturing power has been declining. Time-series data (yes I've given in and gone to the national statistics office - woe to my actual work) has it growing until 1997 and then pretty constant until the recession, which I think reduced production significantly in quite a few countries.

Edit: Don't get me wrong, obviously German manufacturing is more successful, I just want to make it clear that the differences are perhaps not as big as people might think.

[Thanas]

If they are not as big, then why was Britain demanding Germany retool her industrial sector into a financial one not that long ago? Besides, just look at the huge British names that were in existence in the early-mid twentieth century. How many of them still exist? Where is the Siemens, the BASF etc. of the UK?

Don't get me wrong, the UK now appears to have manufacturing as its central growth instrument, meaning they essentially abandoned the earlier methods in favor of the "German way", so to speak. However, that does not seem to work out so great so far.

[Teebs]

If they are not as big, then why was Britain demanding Germany retool her industrial sector into a financial one not that long ago? Besides, just look at the huge British names that were in existence in the early-mid twentieth century. How many of them still exist? Where is the Siemens, the BASF etc. of the UK?

Don't get me wrong, the UK now appears to have manufacturing as its central growth instrument, meaning they essentially abandoned the earlier methods in favor of the "German way", so to speak. However, that does not seem to work out so great so far.

I have no idea, I just looked at the statistics. One possibility is that British manufacturing tends to be foreign companies building things in Britain, but like I said that's a guess. Another possibility is that Britain's leading companies tend to be a bit smaller, I don't think we go in for conglomerations as much as Germany. So while Rolls Royce is very big and successful it does a much more limited range of activities than Siemens and is commensurately smaller.

[bobalot]

Germany economy breaking records? Cudos.
But... Belgium isn't doing bad as well and we don't even have a working government

A great big steaming sign of support for Liberterianism/Small governments if there ever was one

You make it sound like the Belgian government isn't functioning. As far as I'm aware, its political decision making is paralysed, but actual the government is still functioning.

[CJvR]

Well the Germans are going to need all the export they can get now that they are going to close their nuclear power plants and import Russian gas and French electricity instead. Should make a nice dent in the annoying trade surplus.

[CJvR]

Suddenly a European superstate looks attractive - we can all sponge off our hardworking German cousins.

I think that was sort of the idea behind the Euro, but it swings both ways - a Germany under the D-Mark would have had the currency go through the roof after economic figures like that. However a Germany shackled to Greece, Portugal, Ireland and whatever other basket cases there are in the Euro zone is effectively running with an undervalued currency.

[Serafina]

Suddenly a European superstate looks attractive - we can all sponge off our hardworking German cousins.

I think that was sort of the idea behind the Euro, but it swings both ways - a Germany under the D-Mark would have had the currency go through the roof after economic figures like that. However a Germany shackled to Greece, Portugal, Ireland and whatever other basket cases there are in the Euro zone is effectively running with an undervalued currency.

Which is actually a good thing, as it benefits exports. Given that we export more than we import, having an undervalued currency is a good thing.

[D.Turtle]

Good for us, bad for them.

[Skgoa]

And lets not forget the common market. Once more: Germany reaps HUGE benefits from the inrceasingly deep union.

[Coalition]

Well the Germans are going to need all the export they can get now that they are going to close their nuclear power plants and import Russian gas and French electricity instead. Should make a nice dent in the annoying trade surplus.

This would be funny if Greece managed to scrape together the cash to build a nuclear power plant. Or let German investors pay for the plant, in exchange for low cost power. By using legal openings to nuclear power (with regulations set up beforehand), Greece could slowly build an economy once again.

[Broomstick]

Sorry, the two phrases "scrape together cash" and "build a nuclear plant" in the same sentence make me very uncomfortable....

[Thanas]

Well the Germans are going to need all the export they can get now that they are going to close their nuclear power plants and import Russian gas and French electricity instead. Should make a nice dent in the annoying trade surplus.

I somehow doubt that is going to cost us much - at least not several dozens of billions or so. French electricity is not going to be that much more expensive and Russian gas has never cost that much....

[Thanas]

To follow it up:


As expected, the unemployment rate has now decreased to under 3 Million. A monthly decresase from 7.3 to 7.0 percent achieved the record number of 40,72 million working vs 2,96 million unemployed. An additional 692.000 jobs that pay full taxes, insurance and coverage were created. The best news: Two thirds of those are full time jobs.

Source, in German.

A diagram showing the rate, and a decrease of 0.7% in unemployment when compared to the year before.

[Broomstick]

Can you send some of that over here?

[Starglider]

Well the Germans are going to need all the export they can get now that they are going to close their nuclear power plants and import Russian gas and French electricity instead. Should make a nice dent in the annoying trade surplus.

I somehow doubt that is going to cost us much - at least not several dozens of billions or so. French electricity is not going to be that much more expensive and Russian gas has never cost that much....

That's good, because you'll need plenty of surplus revenue to fund the Greek, Irish, Portugese and possibly Spanish budget deficits in perpetuity.

However, the service sector is to my knowledge much more dialed to the industry than the one in the UK, as well as German manufacturing actually making stuff that people want.

Really, what is your knowledge of the UK service sector?

If they are not as big, then why was Britain demanding Germany retool her industrial sector into a financial one not that long ago?

Who was demanding that (sources)? It makes absolutely no sense for the UK; the London financial industry would obviously prefer not to create additional competitors if they can avoid it.

Besides, just look at the huge British names that were in existence in the early-mid twentieth century. How many of them still exist? Where is the Siemens, the BASF etc. of the UK?

Big-company fetishism is irrelevant to the question at hand, industrial composition. UK manufacturing transitioned from heavy to light industry due to globalisation forcing a focus more on high-value-add products. Due to assorted management failures and socialist bullshit this was a disruptive transition, which naturally replaces large established players with newer, smaller and more nimble ones.

[Thanas]

Really, what is your knowledge of the UK service sector?

Pretty much what was taught me in the economics seminar. If you disagree, feel free to cite sources with comparison.

Who was demanding that (sources)? It makes absolutely no sense for the UK; the London financial industry would obviously prefer not to create additional competitors if they can avoid it.

Did you live under a rock in the 90s? When the UK was praising its "great finance sector" (aka live on credit) and lauded it as the idea of the future?

Big-company fetishism is irrelevant

Having brand names with great histories, name recognition and established customer trust = Big company fetishism. I can almost see your butthurt little body shaking with rage.

to the question at hand, industrial composition. UK manufacturing transitioned from heavy to light industry due to globalisation forcing a focus more on high-value-add products.

Funny how Germany managed to do both and still enjoy "big company fetishism".

Due to assorted management failures and socialist bullshit this was a disruptive transition, which naturally replaces large established players with newer, smaller and more nimble ones.

You know, you almost sound like a reaganite textbook.

As for those nimble players, they sure do not look that good, do they?

[TC27]

If they are not as big, then why was Britain demanding Germany retool her industrial sector into a financial one not that long ago?

When and by whom was this 'demanded'?

I highly dont imagine anyone in the UK ever wanted Germany to do this...particular as Frankfurt is seen as a potential rival for the City of London.

In my experience the German economy in particular the excellent workplace relations has always being held as an example and envied by knowledgeable people in the UK.

And while we are at it to be fair there is whilst many well known consumer brands/names may have disappeared there are some niches that the UK manufacturing sector is still good at.

[Thanas]

Topic cleaned. No more worthless personal anecdotes about chinese quality, okay?

That said, as to the question in the top above, just google "Germany, sick man of Europe" and you will find plenty of English sources about how the German economy needs to reform etc.

[aerius]

That said, as to the question in the top above, just google "Germany, sick man of Europe" and you will find plenty of English sources about how the German economy needs to reform etc.

Man, I remember reading a ton of those articles back in the 90's about how Germany's manufacturing based economy was outdated and would be left behind by the coming infotech age. Apparently they forgot that all those computer chips, telecom equipment, fibre optic cables and so forth require advanced precision machine tools and optics to manufacture, gee, now which country makes a crapload of that stuff? Without German and Japanese optics and machine tools we would not have the computers we have today and they sure as hell wouldn't be as affordable.

Computer chips are made by a photolithography process, the lenses in those machines are all German or Japanese, no optics, no chips. All the circuitboards are assembled on automated machines, there are 4 countries which own pretty much the entire market; Germany, Japan, South Korea, and the US. The stuff might be made in China, Vietnam, Malaysia or some other country I can't find on a map, but they were all made with machines produced by those 4 countries. Your iPhone or iPad was made in China by German or Japanese machines. All Blackberries as far as I know are made on Siemens machines (RIM has giant buildings filled with Siemens assembly lines, they were the largest customer for those machines in North America when I worked there).

IMO it always comes back to manufacturing, that's how you make wealth. Services and financial stuff just shuffles that wealth around.

[bobalot]

IMO it always comes back to manufacturing, that's how you make wealth. Services and financial stuff just shuffles that wealth around.

Recycling the wealth would be a better term. Each dollar earned by manufacturing or by primary industries is recycled repeatedly through the service sector.

[Big Orange]

Computer chips are made by a photolithography process, the lenses in those machines are all German or Japanese, no optics, no chips. All the circuitboards are assembled on automated machines, there are 4 countries which own pretty much the entire market; Germany, Japan, South Korea, and the US. The stuff might be made in China, Vietnam, Malaysia or some other country I can't find on a map, but they were all made with machines produced by those 4 countries. Your iPhone or iPad was made in China by German or Japanese machines. All Blackberries as far as I know are made on Siemens machines (RIM has giant buildings filled with Siemens assembly lines, they were the largest customer for those machines in North America when I worked there).

The UK is not very good at capitalising on technology innovation and has had an ongoing brain drain since WWII. Why didn't the inventor of the Internet, Sir Tim Berners-Lee, stay in the UK and get the corporate support needed to build up the UK's equivalent to Microsoft or Google? The UK should steer its economy more towards productive scientists, engineers and skilled labourers and away from parasitic lawyers, bankers, megastores and property tycoons who are systematically sucking the vitality out of everything. Three trillion pounds were squandered to keep the City of London from imploding, perhaps the greatest act of legal robbery ever committed. Also the UK's manufacturing sector has not been helped when you've got criminal tricksters such as the Phoenix Four who ran the struggling MG Rover into the ground for their own short-term gain, but despite these severe hang ups the UK still manufacturers and exports a surprising number of goods in recent years, like medicines.

Germany's industry was more efficient than UK industry as far back as the 1900s (British military uniforms leading up to WWI were coloured with chemical dyes produced in German factories). And many German companies who make high-end specialist stuff are often family owned and performed better than DAX companies in creating employment and sales growth from 2003 to 2005, with family managed cartels more averse to hostile mergers and short-sighted or anti-social decision making. But there's a darker side to the current German economic miracle when as much as almost one third of new jobs created by successful German companies this year are temporary, with roughly one in five German workers relatively low paid and there's no official minimum wage in order to keep competitive (though it beats languishing on welfare alone).

And the economic rebound is abating a bit since April, but to be fair that's after such a large surge and Germany is still the largest economy in Europe:

German Industrial Output Unexpectedly Fell in April on Construction Slide

German industrial production unexpectedly declined for the first time in four months in April, led by a drop in construction output.

Production fell 0.6 percent from March, when it rose a revised 1.2 percent, the Economy Ministry in Berlin said today. Economists had forecast a gain of 0.2 percent, the median of 36 estimates in a Bloomberg News survey showed. In the year, production rose 9.6 percent when adjusted for working days.

The German economy, Europe’s largest, may lose some momentum after expanding at the fastest pace in almost a year in the first quarter, with surging energy costs sapping companies’ spending power and European governments toughening austerity measures. German manufacturing growth and investor confidence weakened last month and exports dropped more than economists forecast in April.

“While the boom may have peaked, the economy is still powering ahead,” said Tobias Blattner, an economist at Daiwa Capital Markets in London. “The domestic economy will remain fairly strong, with exports the main growth driver.”

Construction output fell 5.7 percent in April from March, when it advanced 5.5 percent, today’s report showed. Manufacturing declined 0.6 percent, led by a 1.5 percent drop in investment-goods production. The ministry revised up the gain in overall March industrial output from 0.7 percent.

The production trend continues to “point upward despite a slight cooling at the fringes,” the ministry said in the statement. It forecast a “slightly calmer pace of expansion” after “a very strong production pace in recent months.”

First-Quarter Growth

Construction, company investment and export growth powered Germany’s 1.5 percent economic expansion in the first quarter. Audi, Volkswagen AG (VOW)’s luxury brand, said last month it will add shifts to ease delivery waiting time on increasing global demand.

Economic growth may slow to 2.6 percent this year from a record 3.6 percent in 2010, the European Commission said on May 13. The economy of the 17-member euro region may grow 1.6 percent, the Brussels-based commission said.

A 37 percent increase in crude oil prices over the past year is putting pressure on companies to pass on higher costs to consumers just as governments from Ireland to Spain toughen spending cuts to fight the region’s debt crisis.

German growth will slow, said Ken Wattret, chief euro area economist at BNP Paribas in London. Still, this is “a moderation from exceptionally strong levels, rather than the beginnings of a double dip,” he said.

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