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“But The Rising Star Is The USA”
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
German industrial companies now consider investing overseas – to build new operations or expand existing ones – more attractive than investing at home. China retained the top spot for the third year in a row. The Eurozone, eclipsed by China in 2011, continued to decline. The attractiveness of other target markets slid as well. But there is one market whose attractiveness jumped: the USA!
According to the annual survey by the quasi-governmental Association of German Chambers of Industry and Commerce (DIHK), 43% of German industrial companies with investments overseas considered China the most important target in 2013, same as in 2012 and 2011. It’s no longer just a cheap place to manufacture; the cost motive has dropped from 25% in 2006 to 14% in 2013. The growing middle class makes China a hot market for German-branded products. So the primary motive is market development, and manufacturing in China for the local market: 38% of the companies thought so, and 73% of those in the auto sector – for them, China is where the music plays.
Second place, the Eurozone, edged down from 41% to 40%. For years, it had been top priority, given its geographic proximity, ease of transportation, and the shared currency, peaking in 2008 at 45%, well ahead of China. That was before the impact of the debt crisis became apparent. But it’s hanging in there. Despite the difficult situation and lousy demand, companies want to maintain their presence to be able to profit from the still elusive upticks in the economy.
Recently, companies noticed that reforms – the famous austerity – have lowered costs in some countries, whittling away at the disadvantages they had compared to Germany. If the trend continues, and if demand ever picks up, more investments might flow their way.
Other regions also declined on the German industrial priority list: South America down to 23% from 24%, Asia without China down to 27% from 28%, and Eastern Europe and Russia down to 25% from 26%. The only region that actually grew in importance was the US. In 2005, only 20% of the companies wanted to invest there. In 2012, it rose to 26%. In 2013, it jumped four points to 30%, the highest ever.
Companies cited the growing economy (“growing” in comparison to the Eurozone), the improving employment picture, and rising corporate profits – that all-important juicy fruit hanging in front of them. For companies with energy-intensive processes, and for chemical companies that use natural gas as feedstock, the US looks like nirvana.
Germany is phasing out its nuclear power plants, and much of its supply of natural gas depends on the not always palpable goodwill of Russia’s Gazprom which prices gas based on the price of oil – a ripoff, these days. Struggling with energy costs at home, companies have taken note of the shale gas revolution in the US, and the low price of gas and electricity it engendered. So 33% of metallurgical companies, 39% of the chemical and pharmaceutical companies, and 45% of the auto sector want to invest in the US. They’re also hoping that low energy costs would rejuvenate the American industrial base, which in turn would offer opportunities for German suppliers.
The US is yet more attractive as a vast, unified market. Companies are “hoping for even better market opportunities” and see “growing demand for products ‘Made in Germany,’” the report found. Given these trends and their potential, the report exuberantly concluded that other regions are hanging on, “but the rising star is the USA.”
For Germany itself, the picture is less rosy. The index for domestic investments has plunged three years in a row, from 28 in 2011 to almost zero in 2013 – growth in domestic investments has come to a standstill! Companies that invest overseas to conquer new markets also plan to invest in Germany. But companies that invest overseas for cost reasons are cutting back at home – they’re offshoring jobs. For them, Germany has lost its competitive advantages. The report called it “a warning for Germany as an industrial location that improvements in terms of labor costs, taxes, and energy costs no longer make any headway.” More trouble for the already listing miracle economy.
Italians are electing their 63rd government in 68 years. Normally, Europeans would chuckle about this. But Italy’s debt was downgraded and a bank run seems to have begun. The realization that Italy is too big to bail out is heating up the Eurozone debt crisis. Read.... Italian Political Trouble Just Became EU Economic Trouble.
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“but the rising star is the USA.” Real unemployment north of 20%. Real inflation > 9%. Tens of million on food stamps. Savings being depleted by ZIRP. Sounds more like the shiniest, best looking turd in the punchbowl.
Well, good luck to the Germans on this one. The same austerity that's holding their economy in an endless soft depression is being imposed by Barry and the R's here in the States. The sequester smokescreen and soon, sticking a knife into social insurance (chained CPI indeed) is all about creating poverty where none existed before. Meaning the last, best market for globalization is soon to be just as faded out as any small Eurozone victim.
When the last public worker is furloughed and the last senior citizen has to crawl under a bridge and beg for restaurant scraps, then maybe things will be 'good climate for business'. Until then, racing to the bottom is not a sport for the masses. Them today, us tomorrow.
You mean the last public worket who makes twice the net compensation of their private market peers, and enjoy unheard of benefits after retirement?
The reason most cities in this counttry are broke is because of them, or should I dare say, you.
Plus how can we have austerity if the budget goes up every year. Is this the new math they are teaching in our failing schools?
This wasn't inflation in the public side; it was grinding down the private side. While certain competitive envy types might enjoy watching public workers brought down to starvation wages and then held up for public insult, with any savings financing tax breaks for millionaires, free land and other resources to multinational corporations, and bailouts for deserving financial speculators, those of us who don't need to see suffering to ease our own can have a more balanced view.
Pensions are the big ALEC target, since most people don't see it as deferred compensation, so that any cutbacks on it are a form of theft from the worker. It's available for bookkeeping follies, like adding up twenty five or thirty years of pension and portraying it as an increase or pension. Or not noting the pension's often already financed by savings accounts, insurance, or mutual funds. Or that the funding account was built with a percentage of the worker's forced savings. When you lie, only the wonks will know it.
And, no, private corporation. Direct contradiction to the Far Right Alternate Universe (FRAU) conviction that it's only selfish. Or, it is selfish. Them today, us tomorrow.
Don't know which budgets you mean. Federal? Paying for the 17 trillion dollar bailout, plus hundreds of billions for war, plus hundreds of billions for corporate subsidies, plus...
Some days the FRAU is just too far away.
USA!, USA!, US... uh...eh??
BMW plant in South Dakota?
Will they get tax breaks and not have to pay Obamacare?
I heard recently that Ford is investing heavily in manufacturing and selling in China, and increased their market share in the Chinese market by 20% in the past 4-5 years.
the melting pot of first world decadence and hopium renaissance.
This is awful as an article. Germany has ALWAYS invested abroad. Pre-1914 Siemens was dominant in Russia, Sir William Siemens was born in Kingston-upon-Thames when Siemens UK was first formed. Steinway build pianos in its New York factory. BMW and Mercedes have had plants in South Africa for decades. Bosch has had plants in Malaysia as has Siemens. Siemens even owned a slice of LG.
Germany has always been a global player competing with Britain and now the USA and Japan. Germany has high labour costs but very high productivity, higher than Japan when adjusted for hours worked. It has a quality edge that few nations can match in key sectors.
This article is pablum. Most companies like to have plants near to growing markets and Europe does not grow because of the politicians glory seeking and empire building. Germany has lots of SMEs - more than any other country in Europe. China is basically a Communist country with State Credit subsidising the well-connected just as in the USA.
There is absolutely nothing new in this article that has not been expressed better by people who know the facts elsewhere
germany is fucked just like the rest of the west. their banks are in shittier shape than the US's(if that is even possible). even the stoic germans can't take supporting the rest of the Euro zone for too long- Merkel knows it and she is turning down the pro-Euro zone rhetoric before the upcoming election. but the Germans love that the rest of Europe keeps the Euro low because if Germany was back on it's own currency it would be as strong as the Swiss's( which is pegged to the Euro which is another crock of shit/mistake). the chinese are buying small and mid sized companies left and right and moving them lock,stock, and barrrel (Putzmeister is just 1 example) to China.
Thank you, I had the same response - this was not up to Richter's mediocre standard.
Unfortunately, USA has priced itself out of the market in almost every field except where they hold a kind of monopoly--weapons sales and certain financial products. The postal costs and cost of production are so expensive overseas buyers no longer buy the USA stuff. Even Americans and mexicans prefer "Hecho in China" it's so cheap. I was in Mexico and could not find any locally made handcrafts. Almost all of it was "Hecho in China."
I read many manufacturers (esp textiles) are now moving their plants to Vietnam and Burma to cut costs even further since China is "getting too expensive." None mentioned moving back to the USA.
All part of inevitable, "Globalization." It's sometimes fast in places and in some areas slower, but "globaization" is gobbling everything up for the better or worse.
Inevitable? That's a self fulfilling prophecy, and a semireligious creed, and something that needs to be subsidized at all levels of government. It's class warfare, so it's fought by the people who buy governments. It's 'expert advice' by paid shills and propaganda by paid talkers. It's all so giddy happy by academics who still worship the word 'diversity'.
The US, if we wanted to, could break out of the web that's pulling us down and keep our economy to ourselves. But neoliberals are fighting for the power of a small group of merchants over the lives of the rest of us. It's not inevitable, but it is a tough one to crack.
It has to be BREAKOUT. Nothing will happen unless People rise up and Demand Change. Look what the Mugwumps had to do in 1884.
Trouble is today that BOTH parties are corupt and Ross Perot is 82. The System does not allow third force politics so Voters have to start taking states.
It is an 'american' world and the US is the ultimate consumption sink.
Work is consumption. And when you put a monopoly on resources to determine how they are consumed, it includes the possibility to determine where the resources are consumed to enable work.
Next to come: the elections in Germany in September, a coalition of CDU with SPD announced a few days later and about a month later Eurobonds are fact. Could be a rough ride with $dax and $eurusd this summer...
Because Europe has to become Germany's (or Helmut Kohl's) Europe. Instead of tanks this time they come with banks. And Europe then will become a boring unity Bratwürst.
Yes that well-known German bank Goldman Sachs with Marcus Goldman of Trappstadt and the Bavarian Sachs family though Samuel Sachs was born in Maryland. This German Bank Goldman Sachs has placed ts aumni everywhere and has taken over the United States because American banks were clearly not up to the task. Bankers Trust folded neatly into Deutsche Bank as did Alex Brown.
This is not new...the Kuhn Loeb bankers, Warburgs, Henry Lehman of Bavaria and his Lehman Bros. I mean did the Americans have the ability to create a bank or was it always Europeans that showed them the way ?
As for Banks in Europe they are obviously bust simply by virtue of the fact that these clowns have daisy-chained Debt so one bank can book it as an "Asset" and another as a "Liability" with a lovely overlay of CDS as an Insurance Policy t make it look fully hedged.
The whole sham means NO bank is viable. This is the real Domino Effect.
never underestimate latin urge to rock the boat; its written in history; furia franchese and italian maestra in all thats original like our friend Beppe...the chirpy grillon who sings anarchy songs.
BTW : Muslim rage is the last expression of Abrahamic patriarchal oligarchy now going "tits up" under Femen revival. The muslim world will feel the sting of this regression more so than the west.
We will enter the equal sex age. Thank you Simone...de B.
I say this as a hetero man; who is not afraid of the rising tide nor attached to past male pride in Achilles's bearded breed who forgot all about that fatal heel; hubris.
Why are we so scared to achieve societal change where we share more with women and with alt-men, knowing this "gay" trend is innate in human nature and not a decadent character trait. Its the way nature makes some of us; so who are we to say "this is not natural"?
Such societal change makes the patriarchal matrix and its "useful" creationist dogma of divine unquestionable relevance, fed over the ages by the three "good" books, a thing of obsolete social networking.
Our true source of learning, of spiritual and material freedom/ bodily health, is the humanist and logic/science tradition.
Its all greek to me and I love it dearly!
I agree about equal opportunity but feminism might backslash on women. Cause I see that more and more modern men are able to do what was usually reserved for women while women are still not able to do the most basic of 'men things' such as rotating one's tyres. It is a bit more complicated than that of course and sexes will never be the same. Men are better at some things than women and vice versa. And god forbid we would ever be the same, the world would be such a boring place.
Femen by the way are great! Not so much for flagging their breasts but for the fact that that deed makes people nervous. Feminists who trash Femen do not understand that the whole thing is really empowering women.
agreed; vive la différence; separated but equal.
Germany shot itself in the foot with huge investments in wind and solar combined with the nuke phase out. Energy is a huge cost component of every product. The are pricing themselves out of the world market with their domestic energy policies. They are doomed to also suffer demographically and culturally from the combined effects of birth control, abortions, and expanding muslim population.
They are burning much more coal. Germans are more pragmatic than the British who are taxing coal into extinction and driving gas prices through the roof. So Gazprom links gas prices to oil, BFD - that is so throughout Europe and is EU Policy. Try living in Britain - noone here can afford to - energy prices are through the roof. NO American could survive on British Salaries British Taxes and British Energy Costs........but you might have to when QE ends
German industry to German worker and taxpayer: "thank you for making us big, now we will stab you in the back".
Just like what British and American industry did to their workers and taxpayers
the krauts know that the southern hillbillies will work for peanuts- actually with the shitty US economy almost anyone will. german workers look upon US workers the same way as US workers do with Mexicans. plus-the germans know that any labor unrest will be crushed by our brave men in LE that were so effective in Boston. race you to the bottom-bitchez.
Hey, come back! Look... we need you to train your replacement.
Otto I disagree. Actually those hillbillies are making a buck or two an hour less then their unionized cohorts. They are treated better and have some responsibility for the production of the vehicles. But they do not see money out of their pockets going to the crooked union leaders.
I still have meny German friends in Augsburg and most of them thought the USA was the only place that could make quality products, even though they thought theirs was always superior.
I think it's more than a buck or two- I don't think Boeing would bother with the massive cost of shipping production to S Carolina to save a buck an hour on wages.
A couple bucks an hour is a huge cost when considered cumulatively over a large employee base and the timeframes involved with capital investment.
for example at $2/hr and 1000FTEs the reduction in corporate profits over the depreciation period on the construction costs for the new factory is over $2 BILLION. (in 2013 Bernanke bucks, not the even more worthless ones that will be used by the time all is said and done)
???
Well, I'll see you there when we get there.
"But Italy’s debt was downgraded and a bank run seems to have begun."
A key comment! Thanks, Wolf, as always for your articles.
Why doesn't the Troika just move into a nice office in Beijing and get it over with?
Shanghai - Beijing is so 2010. And the air is better.
The air in HELL is better than Shanghai's
Indeed.
The US is yet more attractive as a vast, unified market. Companies are “hoping for even better market opportunities” and see “growing demand for products ‘Made in Germany,’”
Banksters and corrupt gov. workers no doubt make a "vast, unified market".