What does Germany do better than us?

President Trump fails to overthrow Joe Biden despite frantic efforts. We must learn from Germany in tackling corona. The Chinese recovery is continuing and Korean exports finally seem to be benefiting. The European recovery is also continuing at a moderate pace, but eurozone inflation is declining further.

Last week saw the first election debate between President Donald Trump and Joe Biden. It was a little uplifting spectacle in which the president, in particular, constantly interrupted his opponent. The moderator had great difficulty keeping the president in line. Actually, it just didn't work. If the remark 'Act normal, man' was appropriate anywhere, it was here.

Judging by the activity on Twitter, I've come to the conclusion that few people have changed their mind about either. It seemed obvious to me that Trump adhered to the agreed rules less than Biden, but his supporters did not want to hear about that, according to their tweets.

Limit damage
For me, the most important conclusion was that Biden was not going to be blown away. He doesn't have a great reputation as a 'debater' and can apparently get quite off track in debates at times. That was not the case now. On balance, I think Biden has more to lose in these debates than he can gain. Because he limited the damage, or maybe even suffered no damage at all in the first debate, I think you can designate him as the winner of the debate.

We'll see how it goes and whether it continues now that President Trump and his wife have tested positive for the coronavirus. People in their 70s have an 8% chance of succumbing to the virus. I asked my wife this morning if she thought Trump could now count on a voter sympathy vote. She didn't think so, but she thought Mike Pence might get it if the president died before the election.

Why don't we look at Germany?
The number of corona infections in our country has risen sharply in recent weeks. The government has therefore tightened various restrictions. For an economist who follows the economy in the short term, which I do in these weekly contributions, that is very relevant because 'where the virus goes, the economy goes'.

I try not only to listen to the reports, but also to look at the available figures. I've written about that several times. Yes, it is true, the number of new infections has risen and is now more than 2 times higher than at the beginning of April. But that's probably comparing apples to oranges, as there's more testing going on now.

Sounds from hospital more alarming
The number of deaths, hospital admissions and ICU admissions has also risen in recent weeks, but is well below the peaks of early April. That comparison may also be wrong, because more young people are now becoming infected and they are less likely to be hospitalized. Incidentally, I get the impression that the stories I hear from people who work in hospitals are somewhat more alarming than the formal figures suggest.

I still find the figures from sewage research interesting. RIVM publishes this on their corona dashboard. The number of virus particles in a milliliter of sewage was 1430 at the beginning of April, dropped below 20 in July, but has now risen to 456. My conclusion is that the virus is on the rise again, that we have to be careful and follow the guidelines as closely as possible. to hold for behaviour. What does surprise me is that ventilation in schools is only now being seriously considered. A call for this had been made months earlier from various quarters.

What also amazes me is how our numbers differ from Germany's and why we don't seem to try to learn lessons from that. The number of infections in Germany is also increasing, but not nearly as strongly as with us. The number of registered corona deaths in Germany is not increasing at all at the moment. What are they doing better than us and why are we not following the German example?

_{Source: Refinitiv Datastream}

_{Source: Refinitiv Datastream}

China remains crucial for the global economy
China has been the main growth engine of the global economy for years. Earlier I reported on the remarkable recovery there. That seems to have continued into September. Business confidence as measured by the central bank's statistical office rose further in September. The manufacturing sub-index rose to 51,0 from 51,5 in August, while the services sector rose from 55,2 to 55,9. The composite index (see chart) reached its highest level in years at 55,1 (from 54,5 in August).

_{Source: Refinitiv Datastream}

I have been somewhat surprised lately that other countries in the region that nevertheless maintain strong economic ties with China are apparently still not benefiting much from the Chinese recovery. Maybe that's starting to change. Korea's preliminary export figures for September were encouraging. The value of exports was 7,7% higher than a year earlier, the best figure since October 2018.

_{Source: Refinitiv Datastream}

Eurozone recovery continues at a modest pace
The leading 'Economic Sentiment' index, which measures business confidence in various sectors as well as consumers, compiled monthly by the European Commission for the eurozone rose further in September: 91,1 versus 87,5 in August. The press release stated that approximately 70% of the losses due to the corona crisis have now been made up. This is also true based on the graph below.

What struck me most about the numbers was that the services series improved from -17,2 in August to -11,1 in September, while other producer confidence indicators had registered a weakening in September in the services sector. We'll have to wait and see how that goes.

_{Source: Refinitiv Datastream}

We already knew that the southern countries of the eurozone have been hit harder by the corona crisis than those in the north. Spain reported this week that 5,4 million tourists visited the country in August. That was more than 16 million last August. Over the first 8 months of the year, the number of tourists dropped by more than 67%. A very sensitive loss of income.

Eurozone inflation falls further below 0
Eurozone inflation, according to preliminary figures, fell deeper into the red in September: -0,3% year-on-year, from -0,2% in August. Excluding food, energy, alcohol and tobacco, inflation fell from +0,4% in August to +0,2%. The forces of disinflation manifested themselves across a broad front. The rate of price increase for services decreased from 0,7% to 0,5% and that for non-energy industrial goods from -0,1% to -0,3%.

Of the 18 countries for which Eurostat published preliminary figures, 11 posted negative year-on-year figures. Greece had the most negative percentage at -2,3%, Slovakia the highest at +1,5%. The figures confirm what I have been arguing for months, namely that deflation risks are still significantly greater than inflation risks. I wonder whether the ECB can do much about this. That doesn't mean they won't take action. Quite the contrary probably.

CBS reported this week that 63 companies in our country went bankrupt in week 39. That was the highest number in two and a half months. Now these numbers are very volatile and a weekly figure doesn't say much. So far, fewer companies have gone bankrupt this year than last year. That's crazy and probably means that government support is keeping companies afloat that would have collapsed without the crisis.

The low insolvencies are unsustainable and the most recent figure may suggest that the expected rise has begun. I think a wave of bankruptcies will put further downward pressure on inflation. After all, means of production come up for sale at liquidation prices. This allows the new owners to produce more cheaply.

Hans de Jong

Han de Jong is a former chief economist at ABN Amro and now a resident economist at BNR Nieuwsradio, among others. His comments can also be found on Crystalcleareconomics.nl

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