Overseas Headlines – December 12, 2017


German domestic demand for factory equipment seen rising

German engineering output is likely to grow at a steady 3 percent next year as domestic manufacturers begin to reinvest in equipment, compensating for slower export growth to China, industry association VDMA said on Tuesday. Engineering is still the backbone of Germany’s economy – which is set to grow by more than 2 percent this year – generating an expected 224 billion euros ($264 billion) in sales this year and employing about 1.35 million people. “We see the first signs that domestic demand is rising,” VDMA Chief Economist Ralph Wiechers told a news conference at the organization’s headquarters. “Domestic business will play a bigger role in growth than in the past years.” Domestic orders for machinery rose 6 percent in the three months to end-October, the VDMA said. Domestic consumption is also lifting the wider German economy, which is traditionally powered by exports. German exports as a whole fell unexpectedly in October, as did industrial exports. Wiechers said growth in the Chinese engineering market, which has driven German exports for the past few years, would likely slow to 6 percent in 2018 from 8 percent in 2017. The VDMA’s exports to China grew 24 percent in the first nine months of 2017. Market growth in the United States, the VDMA’s top export destination, is expected to slow to 2 from 3 percent. VDMA exports grew 11 percent in January-September.




China’s growth objectives clash with financial stability goal – IMF

China should priorities financial stability above development goals, as pursuit of regional growth targets and helping firms avoid heavy job losses had led to a surge in debt, particularly at local government level, the International Monetary Fund said. Noting a lack of coordination and inadequate systemic risk analysis in a report released on Wednesday, the IMF also recommended the formation of a financial stability sub-committee comprising the central bank and three financial regulatory agencies, and an increase in staff for the banking watchdog. Since the IMF’s last assessment of the Chinese financial sector’s resilience to shocks and contagion in 2011, two concerns remain – credit growth remains high and the expansion of wealth management products (WMPs), said Ratna Sahay, deputy director of the IMF’s Monetary and Capital Markets Department. “Risks are large,” Sahay told reporters during an online briefing. “Having said that, the authorities are really aware of risks and they are working proactively to contain these risks.” The IMF report said that while China has been taking steps to address its debt risks, reining in excessive credit growth will require a de-emphasis on high GDP projections in national plans that have spurred local governments to set high growth targets. But the near-term prioritization of social stability seems to depend on credit growth to sustain financing to firms even when they are non-viable, it said.




Trump’s push to cut federal jobs has modest impact, mostly in defense

President Donald Trump’s campaign to shrink the “bloated federal bureaucracy” so far has made a small dent in the federal workforce, and that largely because of a decline in civilian defense jobs. Days after his Jan. 20 inauguration, Trump ordered a hiring freeze later replaced with an order for federal agencies to cut staff immediately, and in March he proposed a 2018 budget that sought to shift $54 billion to the military from other departments. However, federal civilian jobs declined around 6,000 in the first nine months of this year, or just 0.3 percent of 2.1 million such jobs tracked by the Office of Personnel Management, according to Reuters calculations based on the latest OPM data published in late October. The White House Office of Management and Budget declined to comment on the overall drop in federal employment or the mix of job gains and losses across agencies. The Office issued in April the order for agencies to start near-term staffing cuts and to submit plans for longer-term reductions by September.