In the first quarter of 2019, new business with corporate customers grew 6.4% over the previous year. Companies have taken out long-term loans. According to Kfw Research, there is no lasting trend.
As KfW Research's current credit market outlook shows, the momentum in the first three months of the year remained almost as strong as in the last quarter of 2018. Growth was 6 times higher, 6% to that of the previous year. According to KfW analysts, economic development in Germany since the second half of 2018 has been revealed "quite disappointing".
Special effects on vehicles boost demand for capital
It is interesting to note that the trend is towards long-term credit exposure, despite the economic slowdown, moderate corporate sentiment and the uncertainty surrounding global trade disputes and the upcoming Brexit. With this money, companies financed investments, which had increased by 1.9% from January to March compared to the previous quarter. According to KfW experts, special effects in the automotive industry are one of the reasons. In the second half of 2018, manufacturers were sometimes not able to register their models for sale via the new WLTP test procedure. The resulting production and sales congestion was then partially resolved in the first quarter of 2019. The camps created in 2018 were dismantled and the vehicles delivered to businesses early in the year. This process should also have encouraged new long-term credit commitments.
However, since this effect is only temporary, analysts expect business investment growth to slow as the year progresses due to other factors. "The new Brexit ultimatum, which has been deferred for only a few months, provides a good example of the cyclical mitigation effect of such risks," the paper said. Nevertheless, analysts stress that risks also offer opportunities. If there was to be a solution in the trade dispute between the United States and China, it should stimulate the economy of China and therefore of the world. Selected investments could be made.
Analysts expect more short-term loans
The analysis also assumes that banks will be more cautious about lending in such an environment. At the same time, the number of short-term loans could increase again. These have forced companies to finance stocks or overcome bottlenecks in cash. "Overall, the fat years on the credit market are likely to end soon," the forecast concludes.